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Global butadiene firms further on US demand despite new Asian production capacity


Asia/Europe seek arb opportunities to US

Possible US tire dumping duty to raise local output

  • Author
  • Fumiko Dobashi    Astrid Torres    Callum Colford
  • Editor
  • Debiprasad Nayak
  • Commodity
  • Petrochemicals

Global butadiene prices continued to see gains in recent weeks amid sustained demand from the US market despite the onset of new Asian capacity increasing overall availability.

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On June 17, CFR China butadiene price rose $10/mt day on day to be assessed at a six-month high of $1,200/mt, while FOB Rotterdam butadiene price was assessed unchanged at $1,700/mt during the same period, the highest level since April 2017, according to S&P Global Platts data.

The CIF USG butadiene price was assessed unchanged week on week at 62 cents/lb on June 11, the highest level since October 2018, Platts data showed.

US receiving cargoes from Europe/Asia

The US market is attracting cargoes from Europe since the winter storm which hit the region in February impacting production along the Gulf Coast. This came along with the ongoing production issues following TPC Group's Port Neches plant explosion in 2019.

Since TPC Group's Port Neches 2019 explosion, the US has seen a significant fall in butadiene exports. The site produced 20% of US butadiene, according to a source familiar with company operations. Sources expect the Port Neches site to be out of operation for a minimum of five years.

US butadiene exports in 2020 fell more than 13.7% year on year to 61,632 mt, US International Trade Commission data showed. The waning exports have continued into 2021 with US butadiene exports in January-April falling nearly 54% year on year to 3,866 mt, according to the data.

With recent issues at TPC's butadiene plant, sources expect continued tightness in the US.

Sources said spot export butadiene at around 80 cents/lb CIF USG, however, the price was seen largely as notional given the lack of actual outflows. "Considering the US price is highest in the world, I wouldn't expect to see anything being exported unless it was to Mexico," one source said.

Recently, the US has seen a large influx of imports from Europe and Asia.

According to shipping reports, 7,000 mt of butadiene was fixed to load in ARA and destined for the US Gulf Coast between June 19 and 20. Another vessel was fixed to load 5,000 mt of butadiene in Jiangyin and destined for the US Gulf Coast between June 16 and 30.

Asia accelerates exports

Asia added around 1 million mt/year of butadiene capacity in 2020. In 2021, LG Chem started its new 130,000 mt/year plant in Yeosu while Zhejiang Petrochemical in China is due to start its new 200,000 mt/year butadiene plant in July.

Amid butadiene capacity expansions, Chinese suppliers accelerated exports since 2020. China's key butadiene export destination is nearby South Korea. According to the latest data by the Korea Customs, South Korea imported 47,724 mt of butadiene from China for January-May, compared to 1,911 mt a year earlier and a total of 25,232 mt in 2020.

Asian suppliers have been seeking opportunities to move their excess supplies to the Americas. So far, market sources estimated that around 15,000 mt of butadiene has been fixed for June/H1 July loading from Northeast Asia to the US/Mexico.

Despite excess supplies from China, it would be difficult for traders to move Chinese cargoes to the US due to additional 25% tax payment. Therefore, traders are seeking spot cargoes from South Korea to move to the US.

Ex-China cargoes can be moved to Mexico however, some trading sources said spec can be an issue. "Endusers need to mix Chinese origin cargoes to use. I heard Mexico can take up to 5,000 mt per month but no more," said a market source.

Europe export vs CP spread at multi-year high

The European market -- traditionally a net producer which relied on exporting to Asia as an outlet for excess production -- has seen export prices reach their highest level since April 2017. Meanwhile, the spread between European export and contract prices standing at $561/mt June 16, the highest since March 2017. Aggressive US buyers and a tight European production schedule have provided firm support to price levels and driven a $1,000/mt rise in export prices since late-February to the latest European deal heard at $1,700/mt FOB ARA.

"$1,700/mt seems high to me but US buyers are paying it so this is where the price is," a European producer said.

European producers expect export prices could move higher in the short-term noting unresolved US production issues and expected bullish downstream demand over the summer as well as an expected tight European market given constrained in European production levels.

European producers and downstream synthetic rubber consumers are also keeping a close eye on the US Department of Commerce's decision to implement antidumping duties on passenger car and light vehicle tires from South Korea, Taiwan, Thailand and Vietnam with a confirmation decision announcement expected July 5.

European butadiene producers are hoping if the decision on antidumping duties is officially implemented, American synthetic rubber producers are expected to increase local production to compensate for any shortfall in Asian tires, which will likely increase butadiene exports from Europe to the US.

European synthetic rubber producers are also watching the situation and hoping to increase synthetic rubber exports to the US if the decision is confirmed, which is likely to increase demand in the European butadiene domestic market.