European butadiene market has slowly undergone a structural change with spot trade accounting for an increasing share of total business, market sources said.
The trend became pronounced in the second half of 2015 as 310,000 mt/year of new capacity went online in Europe.
“Almost all the cargoes exchanged hands in Europe on a contract basis earlier. But we now prefer more spot trade as they come at remarkably cheaper prices than contract,” one of the largest butadiene consumers in Europe said. “We are in a position to demand discounts from producers considering they have a better availability of cargoes and demand within Europe is not strong.”
A total of 310,000 mt/year of new butadiene capacity has come online in Europe over the second half of 2015, applying a strong pressure on prices and allowing producers a wider scope for exporting cargoes. New butadiene plants starting up in the period include Hungary’s MOL Petrochemicals’ 130,000 mt/year butadiene plant in Tiszaujvaros, German group Evonik’s 100,000 mt/year butadiene plant in Antwerp, Belgium, and Austrian OMV’s 80,000 mt/year plant at Burghausen, Germany.
“We can say roughly that currently about 20% of all butadiene traded in Europe is on a spot basis. Previously, almost all the cargoes in Europe exchanged hands through contracts,” a trader said.
The trend gathered momentum towards the end of 2015 and spot deals have consistently been reported in Europe since December. However, a higher share of the spot trade has been for exports. Almost 48,000 mt of butadiene has been exported out of Europe in December-February and a major share of this was spot, trade sources said.
Another impact of higher availability of butadiene within Europe has been consistent demands from consumers and traders for a steeper discount over monthly settled contracts. While European contracts are settled on a monthly basis, the cargoes actually exchanged hands at a discount ranging between 3%-6% from the settlement price. The discounts now being demanded by converters are at 10% and higher. The last spot deal for domestic market in Europe was heard at Eur450/mt FD NWE at a 9% discount to the February contract.
