European Butadiene prices Fall Amidst Bearish Upstream

Hamburg (Germany): For the second consecutive week, Butadiene prices have observed stability and a marginal decrement has been observed in the European market supported by weak upstream prices. Regional demand remains sluggish with downstream factory production at reduced levels has further supported the current price trend of Butadiene. In addition, inventories have accumulated in the regional market amid a slowdown in consumption. Producers were also facing added pressure to clear inventories as the year-end approaches.

According to ChemAnalyst latest data, Butadiene prices have slightly declined by USD 6/MT in the German market. Despite the ongoing conflict between Israel and Hamas in the Middle East, Brent crude oil prices have not seen a great increase, and consequently, the decrease in feedstock Naphtha has culminated in the weak cost support for Butadiene in the domestic market. On the demand side, the inquiries from downstream Synthetic rubber such as Nitrile Butadiene Rubber, Styrene Butadiene Rubber, and Poly-Butadiene Rubber with Polymer (Acrylonitrile Butadiene Styrene) industry have persistently dropped amid tepid consumption from the construction sector which failed to prop up the prices of Butadiene. As per the source, the German construction Purchasing Manager Index dropped from 39.3 in September to 38.3 in October, indicating a contraction in new orders. Although, offtake from the automotive industry have improved in the German domestic market according to the German Federal Motor Vehicle (KBA) reported that new passenger car registration in October increased by 4.9% over the previous year to 218, 959 units, it had an insignificant impact over the prices of Butadiene. As a result, prices of Butadiene FD Hamburg were settled at USD 719/MT during the week ending 10th October.

In addition, the manufacturing firms have not operated at full capacity as demand from the downstream industry has not been fully retrieved. The availability of Butadiene was also sufficient to meet the overall downstream demand. However, the manufacturing purchasing manager index has remained in the contraction zone (i.e., below 50), mirroring a deterioration in industrial and manufacturing activity. The movement of finished goods was unimpeded as no major supply chain constraints have been reported in the given timeframe. On the other side, the major producer of Butadiene in Germany BASF has reported a net loss of $ 264.4 million in Q3 2023 compared to the $ 986 million in Q3 2022. The main factor behind the loss was the lower product prices and volumes along with weaker global demand.

Given the recent circumstances, ChemAnalyst anticipates that Butadiene price might further experience a drop in the European market due to low upstream prices and sluggish demand from the downstream derivatives. However, there is an expectation that a Butadiene price recovery might take place in Q1 of 2024, driven by potential regional demand recovery, supporting higher Butadiene prices across the Eurozone.