Butadiene prices have remained under pressure across the globe during the third week of June 2023, backed by the slow growth of the downstream market and oversupply. In addition, mounting inflationary pressure and rising interest rates to combat inflation have eroded the purchasing power of the end-use sector, thus impacting the overall market dynamics of several commodities, including Butadiene.

Prices of Butadiene have decreased significantly in the Chinese market due to weak demand and ample supply amidst the restart of plants. Although feedstock Naphtha prices have increased, it had limited bearing over the prices of Butadiene in the domestic market. The inquiries from the downstream synthetic rubber (NBR, PBR) and the polymer (ABS) sectors have remained subdued amidst rising interest rates and sluggish domestic economic recovery. On the supply front, the restart of Liaoyang Petrochemical and Shenhua Ningxia coal plants, coupled with the continuous arrival of imported cargo at Chinese ports, had put pressure on the market supply side, which has the other factor for the price decline in the domestic market. In addition, China's manufacturing purchasing manager index dropped from 49.2 to 48.8 in May, reflecting a contraction in new orders. Therefore, prices of Butadiene CFR Qingdao were settled at USD 693/MT with a week-on-week decrement of 12.4% in the week ending 16th June 2023.

Furthermore, Butadiene prices have plunged by USD 75/MT in the European market due to weak cost pressure from the feedstock Ethylene. The synthetic rubber and polymer industry, which is a major consumer of Butadiene, has experienced sluggish demand amid high inflation, which has reduced the purchasing power of the consumers. In addition, ifo reported Business Climate Index has declined from 93.4 points in April to 91.7 points in May. Despite the European Central Bank's efforts to control inflation by increasing interest rates, inflation levels are still higher than the target. Regarding the input energy front, natural gas prices in Europe have been rising in the last two weeks due to outages and maintenance at processing plants. On the other side, sufficient material available in the European ports owing to steady inflows of cheap import offers from the Asian and the USA market has resulted in the dominant supply market. Overall, weak demand and ample supply have weighed down the prices of Butadiene in the regional market.

Similarly, Butadiene prices have inched lower in the USA market amidst limited offtakes from the downstream synthetic rubber and polymer industry. In addition, the operating rates were reduced as there was enough supply of Butadiene to meet the existing downstream demand. On the other side, the core inflation has been trending above the US Federal Reserve's targeted levels and inching downwards at a slower pace, pressuring the market fundamentally. Overall, the movement of finished goods was unhindered as there were no bottlenecks, and freight charges have also remained on the lower end, which supported the Butadiene to follow the downtrend in the domestic market. As a result, prices of Butadiene CFR USGC were assessed at USD 688/MT on 16th June 2023.

According to ChemAnalyst anticipation, Butadiene prices will further drop in the global market due to inactive inquiries from the downstream synthetic rubber, polymer, and other sectors in June. The cost pressure from feedstock is expected to be inadequate as their prices may decrease. Although energy prices may continue to rebound in the region ahead of inadequate supply due to the limited demand, prices are likely to stay in the downtrend in the upcoming weeks. However, market participants speculated that prices are likely to increase in the third quarter of 2023, as procurement from the downstream industry may rise ahead of seasonal demand.