Amid Active Downstream Demand and low inventories, Butadiene Prices Witness Optimism in the US Market

Texas (USA): During the second week of April 2024, Butadiene prices have been marching higher in the North American market. The major reason for the price increment was the tight supply, as well as high energy and feedstock prices. Besides, a demand uptick also has a positive impact on the market sentiment of Butadiene in the regional market. Prices of Butadiene have witnessed a substantial increment of USD 110/MT in the US market.

Market players report that cost support from feedstock butane has increased, followed by strong energy prices, which in turn resulted in the high production cost of Butadiene, supporting the prices to follow an uptrend in the domestic market. On the input energy front, natural gas prices edged up by 1.13%, settling at 142.8, as forecasts for limited feed gas demand and milder weather tempered upside momentum. Despite concerns about a considerable excess in storage and reduced demand forecast over the upcoming weeks, there was a continued absence of significant price fluctuations.

This occurred even as production decreased due to reduced drilling activities following a price slump in February and March, with forecasts suggesting colder weather ahead. Furthermore, according to data from the financial firm LSEG, gas output in the Lower 48 states declined to 98.8 billion cubic feet per day (bcfd) in April, down from 100.8 bcfd in March. Additionally, the availability of Butadiene was relatively limited due to production cuts in the previous quarter.

Thus, in the near term, it is expected that the supply of Butadiene will be anticipated to increase in the domestic market. In the meantime, import offers from the Asian market have remained on the higher end due to strong production costs and tight supply, which further supported the current price trend of Butadiene. On demand side, the inquiries for Butadiene from the downstream synthetic rubber, mainly NBR, and SBR, as well as from the polymer (ABS) industry, have raised despite persistent inflation and high-interest rates.

Market players report that consumption from the end-user automotive sector has escalated this week, which consequently raised the demand for Butadiene in the domestic market. As per the market source, US new vehicle sales of 1,455,030 units for the month of March represented an increase of 15.5% from February and an increase of 5.1% from one year ago in March 2023. Thus, foreseeing the above scenario, manufacturers of Butadiene have raised their offers. As a result, prices of Butadiene CFR USGC were settled at USD 1103/MT during the week ending 12th April 2024.

According to ChemAnalyst, prices of Butadiene are expected to increase further in the US market as cost support from upstream is anticipated to rise. Furthermore, demand from the downstream derivative industry might escalate further due to the rise in consumption from the end-user automotive and construction sectors. On the other side of the coin, the supply of Butadiene might improve as container shipping major Maersk and others will resume Panama Canal transits for its OC1 service starting from May 10th, it will cease the "two-loop" arrangement it initiated in January due to transit limitations resulting from an ongoing drought.