Europe Butadiene Price Show Bullish Trend Amidst high Upstream Value

The European Butadiene market is about to end the year 2023 with a firmer sentiment on the back of rising supply concerns. Despite the initial dip in Butadiene prices at the start of December, with many participants more concerned with their book closures than new commitments, the recent unrest in the Red Sea has significantly altered the situation. In addition, the upstream prices have also been observed on the higher side supporting the prices to follow an upward trend in the regional market. Although demand from the downstream industry has remained subdued, it was insufficient to drive the price realizations of Butadiene at the lower side in the region.

According to ChemAnalyst latest database, Butadiene prices have demonstrated an increment of USD 64/MT in the German market during the last week of December 2023. The feedstock Naphtha prices have increased in the past few weeks, resulting in the high production cost of Butadiene in the domestic market. On the other side, the upstream crude oil prices have jumped by approximately 1.5% due to potential disruption in the Middle East after a naval clash in the Red Sea and hopes of strong holiday demand and an economic stimulus in China. Market sources report the Brent crude increased $1.20 or 1.5% to $78.24 a barrel, further impacting the manufacturing cost of several commodities including Butadiene. These lead to the bullish market sentiments of Butadiene among the manufacturers.

However, on the other side of the coin demand for Butadiene from the downstream Synthetic rubber notably Nitrile Butadiene Rubber and Polybutadiene Rubber along with Polymers such as Acrylonitrile- Butadiene Styrene industry has remained dull in the domestic market. The consumption of Synthetic rubber and Polymer from the end-user automotive and construction has tepid in the backdrop of the off-season lull within the domestic market. Although, it had minimal impact on the prices of Butadiene.

Regarding domestic production, the operating rates remained low as market players did not observe any improvement in the demand from the downstream industry. Moreover, the material availability was limited to cater to overall downstream demand. Meanwhile, the imports from the US and Asian markets have been slowed down on the German market in the wake of disruption in the major trade routes. On top of the Middle East conflict that kicked off in early October and caused jitters across the financial and commodity markets. Furthermore, the recent disruptions to the Red Sea traffic have wreaked havoc in Butadiene markets. In addition, major shipping companies suspended their runs through the route as attacks on commercial ships heightened security concerns. As a ripple effect, prices of Butadiene FD Hamburg were settled at USD 846/MT during the week ending 29th December.

ChemAnalyst anticipates, that prices of Butadiene might rise but at a slower pace across the European market in the first half of 2024 due to further expectations of increase in feedstock Naphtha prices. Furthermore, the Suez Canal disruption may involve an additional request for the European producers as the transit time for imported material from the region will be longer. However, on the demand front, the inquiries from the downstream industries like Synthetic rubber and Polymer industry are projected to remain doldrums during most of Q1 2024. Economic challenges and muted consumption are likely to weigh on Butadiene consumption, not to mention the low season during the winter. Yet, the possibly cooling inflation will start to help activity recover towards or during the second half of 2024.