Butadiene Prices Show Bullish Trend in Germany, Korea Hanwha Total to Load Down Production

Hamburg (Germany): Butadiene prices have persistently increased across the European market during the first week of March 2024. Tightening supply conditions were the main driver behind the price rise, even though demand remained under pressure from economic challenges. Additionally, high energy and feedstock costs have further supported the prices to follow an uptrend in the regional market. Meanwhile, import prices have reached their highest levels as longer transit times and high shipping costs stemming from the Red Sea attack caused a series of notable hikes.

Prices of Butadiene have demonstrated an increment of USD 47/MT in the German market. The cost support from feedstock Naphtha was sufficient for Butadiene as its prices settled on the higher end in the domestic market. Furthermore, international crude oil prices gained as European diesel demand, constrained by Russian sanctions and shipping disruptions, pulled oil prices higher in a market jittery with US refinery output limited by planned overhauls. The strong crude oil prices have further raised the overall production cost of Butadiene in the domestic market. In addition, reduced domestic production in the previous month in response to a decline in downstream demand led to the limited availability of finished stock of Butadiene in the domestic market. Furthermore, the market source reports German Purchasing Manager Index dropped from 45.5 in January to 42.5 in February, indicating a contraction in industrial and manufacturing activity. Moreover, imports from the Asian market have turned costly amid a rise in freight charges, which in turn led to high imported prices of Butadiene in the German market.

However, the underlying demand for Butadiene from the downstream Synthetic rubber and Polymer industry was soft and stable amid the weak macroeconomic climate. Market players are hoping for some uptick when the spring season begins. Meanwhile, rising costs of imported goods further contribute to overall inflationary pressures, dampening demand. As a ripple effect, prices of Butadiene FD Hamburg were settled at USD 962/MT during the week ending 1st March 2024.

Meanwhile, in the South Korean market, Butadiene prices have risen recently due to tight supply. Notably, the major Butadiene producer Hanwa Total in Daesan, South Korea, is set to temporarily reduce Butadiene production from March 5 to March 13, 2024. This decision follows the detection of a technical issue in its 150,000 t/year compressor unit. Although a complete shutdown is not expected to be necessary to address the problem, the company foresees production losses of approximately 3,200 tons. As a result of this reduction, March contract deliveries to off-takers will see a decrease of up to 1,400 tons. Additionally, the company has abandoned its previous plan to sell a 1,800-ton spot cargo for April. Consequently, South Korean Butadiene consumers, including Kumho Petrochemical and LG Chemicals, may need to explore imports to offset the decline in production. As a result, prices of Butadiene CFR Busan were settled at USD 1177/MT with a week-on-week increment of 5.0% on 1st March 2024.

Over the near term, ChemAnalyst anticipates Butadiene prices are expected to remain firm across the Asian and European markets amidst limited supplies as well as higher feedstock costs. However, demand for Butadiene from the downstream derivative industry is not likely to improve in the coming weeks.