Amid Tepid Downstream Demand, Butadiene Prices Decrease in Asian and European Markets

Butadiene prices have continued to witness a bearish rally across Asia and European markets during the fourth week of March 2023, backed by the low-cost pressure from the feedstock. Lacklustre demand, ample supply, high inflationary pressure, and worker's strike in France have further obstructed Butadiene's market growth.

Since the start of March 2023, Butadiene prices have consistently dropped in the Chinese market. The procurement from the downstream synthetic rubber was not robust, so the prices of Butadiene have inched lower in the domestic market. In addition, operating rates remained weak in the domestic market, while the steady imports from Japan and other exporting countries led to sufficient material availability in China's domestic market. Furthermore, feedstock Ethylene prices have also remained weaker, resulting in Butadiene's overall low production cost. Furthermore, market participants reported that new production capacity was begun, resulting in the product's oversupply. However, demand has remained subdued; hence the product's market price has decreased significantly. Thus, prices of Butadiene were assessed at USD 1148/MT with a week-on-week decrement of USD 42/MT during the week ending 24th March.

Furthermore, one of the major manufacturers of Butadiene, Hyundai Chemical, Daesan in South Korea, having a production capacity of 150,000 MT/year, shut down their plant in February 2023 due to maintenance turnaround. Currently, there are limited to no outcomes of the shutdown. However, persistent closure may influence supply dynamics in the coming quarter of 2023. On the other side, Hanwha Total Energies Petrochemical, Daesan in South Korea, having a production capacity of 150,000 MT/year, has planned to shut down their Butadiene facility in Q2 of 2023 amid maintenance turnarounds.

On the other hand, in the European market, prices of Butadiene have been observed on the lower side, backed by ample supply and weak spot demand. Regarding domestic production, operating rates remained under check in the wake of slow consumption from the end-user industries. Meanwhile, imports from Asia have turned cheaper as prices continued to drop in the Asian market, thus weighing down the prices of Butadiene in the domestic market. Furthermore, demand from the downstream Styrene Butadiene Rubber (SBR) and Polybutadiene Rubber (PBR) industries has continued to weaken as the automotive industry in the European market has been under pressure from a high level of uncertainty in the domestic and global environment, affecting the pricing dynamics of upstream Butadiene. Additionally, the inflationary pressures, now driven by wage disputes, have significantly tightened the European economy. Moreover, the worker's strike in France over pension wages has exacerbated the market downturn and hampered logistics. In conclusion, prices of Butadiene FD Le Havre were settled at USD 909/MT during the previous week.

As per ChemAnalyst, Butadiene prices will likely fall in the Asia and European markets due to further expectations of declining demand from synthetic rubber and other competitive industry. At the same time, cost pressure from feedstock Ethylene may ease. Furthermore, the French workers' strike will also put pressure on European rail transportation and other logistics operations.