Europe Butadiene Prices Show Stability in the Second Week of January, But Brace for Further Price Increase

Butadiene prices in the European market showed minimal fluctuations during the second week of January 2024, with limited support from feedstock. The demand for Butadiene in the region remained lacklustre due to off-season dullness and tepidness in the global economy. Consequently, inquiries from the downstream industry were subdued, reflecting slow consumption from end-users. Despite this, the Red Sea turmoil has instilled caution among industry players, impacting ocean freight rates and logistics operations, signalling potential supply disruptions. It is anticipated that Butadiene prices will likely rebound in the upcoming weeks.

According to the latest data from ChemAnalyst, Butadiene prices have remained stable in the German market. Despite the increase in international crude oil prices, a decline in feedstock Naphtha prices within the given timeframe resulted in lower production costs for Butadiene. German producers adjusted run rates at their plants to align with demand conditions amid a challenging economy and the off-season. Some Butadiene manufacturers chose to idle capacity at their production lines due to squeezed margins in the face of tepid demand.

Meanwhile, imports from the Asian market to German ports have slowed down due to disruptions in the global supply chain, particularly on the key Middle Eastern trade route. This has led to extended shipping times, additional surcharges, and rising freight costs. Freightos reported that Asia-to-North Europe rates more than doubled to above $4,000 per 40-foot container, while Asia-Mediterranean prices climbed to $5,175. Despite these challenges, the supply of Butadiene within the domestic market remains relatively unaffected due to weak demand and ample supply.

As a result, Butadiene prices FD Hamburg settled at USD 846/MT for the week ending January 12, 2024. Inquiries from the downstream synthetic rubber and polymer industry have been inactive, as the construction sector, a key end-user, grapples with economic challenges. Germany's construction Purchasing Manager Index edged slightly from 36.2 in November to 37 in December but still indicates a significant contraction in construction activity. Persistent inflation and high-interest rates have contributed to decreased Butadiene consumption, and manufacturers have refrained from implementing any price adjustments within the domestic market.

Looking ahead, ChemAnalyst anticipates potential increases in Butadiene prices in the coming weeks, supported by expected delays in supply due to rerouting and potential disruptions within the European market. Additionally, the likelihood of rising feedstock Naphtha prices could contribute to an increase in the production cost of Butadiene. However, a significant improvement in demand from the downstream industry is not expected.