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Watch: Asia remains overarching determinant on European butadiene prices

In February, European butadiene spot prices hit a four and a half year high, as a surge in Asian prices pulled in European cargoes amid already tight availability caused by a number of European cracker maintenances, but it is primarily Asia that dictates world fundamentals as the biggest buyer. Since then, the second half of 2017 has seen butadiene spot prices drop considerably.


S&P Global Platts petrochemicals editor, Daved Chohan, reports on how Asia remains the overarching determinant on European butadiene prices, and provides an outlook for global olefins heading into 2018.

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Video Transcript


Asia remains overarching determinant on European butadiene prices

With Daved Chohan, petrochemicals editor



Welcome to The Snapshot – our series which examines the forces shaping and driving global commodities markets today.


In February, European butadiene spot prices hit a four and a half year high, as a surge in Asian prices pulled in European cargoes amid already tight availability.


The tight availability was caused by a number of European cracker maintenances, but it is primarily Asia that dictates world fundamentals as the biggest buyer.


The reduced availability boosted European margins, with the butadiene over naphtha spread hitting $1,934/mt in February.


This clearly benefitted a number of European petrochemicals companies during the first quarter. Italy's ENI raised net profit of its chemicals business by 11% year on year, the company said in May, adding that sales volumes increased by 3% driven by products shortages due to a number of shutdowns at steam crackers and butadiene productions worldwide.


Since then, the second half of 2017 has seen butadiene spot prices drop considerably.


The November butadiene contract price settled at Eur800/mt, down 54% from Eur1750/mt in April.


Again, the price change was driven by Asia. Prices on Tuesday were $1,165/mt, from $3,000/mt in February, and looking forward, the European butadiene market is expected to remain bearish in Q4.


Sources have anecdotally said that the high margin situation seen last year and the beginning of this year is not the new norm, as underlying demand for butadiene from downstream products remains weak.


Furthermore, they added that demand for butadiene in various European countries has been growing at levels below the GDP, meaning that Europe is expected to remain structurally long in butadiene.


Another key determinant of butadiene price movements is natural rubber fundamentals.


Butadiene is primarily used for producing styrene butadiene rubber, which is either used along with, or as a replacement for, natural rubber in the tire industry.


Products like styrene butadiene rubber and acrylonitrile butadiene styrene consume butadiene. A relative glut in the supply of natural rubber, has been pressuring butadiene prices.


However Asia remains the overarching determinant on European butadiene prices, and following the recent slide in Asian prices, it remains to be seen just how far European butadiene prices could fall.


Until next time on the Snapshot—we’ll be keeping an eye on the markets.