Iranian cargoes of butadiene are expected to play a bigger role in controlling mercurial Far East Asian spot markets in 2016 by curtailing sporadic demand for European cargoes, market sources said.
Butadiene prices in Far East Asia tend to rise sharply during the first part of the year when crackers in the region undergo scheduled turnarounds.
In 2015, they more than doubled between the end of February to the end of June on tight supplies following maintenance shutdowns at crackers.
Platts assessed butadiene at $1,390/mt CFR China on June 26 compared with $690/mt CFR China on February 25, data showed.
In 2014, between the end of March to the end of July, butadiene prices in Far East Asia rose 37%, also on tight supplies because of cracker maintenance.
During both these periods 10,000-15,000 mt of European butadiene was sold to Far East Asia to meet the shortfall.
“You could see more Iranian butadiene hitting the Far East Asia spot markets if there is a chronic shortage in the first half of 2016,” a European trader said.
Another trader said: “Banking, shipping and insurance of Iranian cargoes have been preventing their entries into spot markets. If these are resolved, there could certainly be more trade of Iranian butadiene.”
The comment comes close on the heels of Iran reaching a deal with six world powers Tuesday over its nuclear program.
There are several checks on the deal and Iran must show by October 15 that it has met its commitments.
If International Atomic Energy Agency inspectors verify Iran’s compliance, the country will be allowed to enter the global financial system and raise foreign trade of commodities, including petrochemicals.
Sanctions placed on Iran by the US and EU over its nuclear program prevent banks globally from financing Iranian cargoes and they are the sturdiest impediments to Iranian petrochemical exports, including butadiene.
The voyage of butadiene shipments from Iran to Far East Asia is two weeks, much less than the four-six weeks it takes to ship cargoes from Europe to Asia.
Freight to ship butadiene from Iran to Far East Asia is seen at $180-200/mt compared with $350/mt seen from Europe to Asia.
This gives exporters in the country an edge over Europe to ship cargoes to Far East Asia markets to meet sporadic and urgent demand.
Iran currently does export butadiene to Far East Asia but most is sold through tenders and contracts and most of its products land into China.
According to latest Chinese customs data, the country exported 5,345 mt of butadiene to China in May but most of it was exported to meet contract commitment.
“A spur in Far East Asian demand is mostly triggered from Taiwan and South Korea and it should be easier to export spot Iranian butadiene into these markets in 2016,” the second trader said.
Five Iranian petrochemical companies — Bandar Imam Petrochemical Company, Jam Petrochemical Company, Amir Kabir Petrochemical Company, Shazand Petrochemical Company and Tabriz Petrochemical Company — account for a total production capacity of 235,800 mt/year of butadiene in Iran.
The country has a potential to export 80,000-100,000 mt/year.
