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Butadiene price spike in Asia opens arbitrage from Europe, US

The arbitrage for butadiene from Europe and the US to Asia has opened up after tight supply in the region boosted prices to more than two-year highs, S&P Global Platts data showed.

The CFR China price was assessed at $1,400/mt on Friday, unchanged from Thursday, when it had hit a two-and-a half-year high. The CFR China price was last assessed higher than this level on February 2, 2014, at $1,435/mt, Platts data showed. The FOB Korea price was at $1,360/mt Friday, also unchanged from Thursday, when it hit a 14-month-high. The FOB Korea price was last around this level on July 6, 2015, at $1,360/mt.

A shortage of spot cargoes among producers unable to meet the strong demand hiked up the spot prices, market sources said.

On Friday, the FOB Rotterdam price for spot butadiene was assessed at $1,000/mt, while the US spot butadiene price stood at 48 cents/lb ($1,058/mt) CIF US Gulf amid tight supply.

As such, the CFR China/FOB Rotterdam and CFR China/CIF USG price spreads stood at $400/mt and $342/mt, respectively.

Europe to Asia gas freight rates ranged over $280-$300/mt, while US to North Asia hovered at $310-$330/mt, Platts data showed.

“[The] market is extremely tight [in Asia]. No one seems to have any cargoes to sell,” said a South Korea-based producer.

“Discussion levels for October seem to have ended as no one has anything to offer, even if buyers are interested,” another South Korea producer said.

Tradable levels for cargoes loading in H1 November were heard to be discussed around $1,400/mt CFR China, while deals were for end October-early November loading were heard around $1,360/mt on an FOB Korea basis.

While the producers felt that these levels would probably continue into November as well, buyers said it was too high.

“Supply tightness should reduce in November, especially with many refiners in the Far East returning from their scheduled maintenance. Prices should come down,” a Singapore-based end-user said.

Market sources said an unexpected shutdown last week of Shell Chemical’s 186,000 mt/year butadiene extraction unit in Singapore could be another reason for the price jump.

A compressor problem at the stream cracker in Shell’s Pulau Bukom complex caused the company to issue a force majuere on base chemicals, effective September 29.

In spite of the open arbitrage, Europe is unlikely to ease the tightness in butadiene supply in Asia, as ongoing cracker maintenance works have kept supplies of all olefins tight in Europe.

This is expected to ease later when several cracker and butadiene units restart or raise their operation rates in October, Platts had reported. However, it takes about six weeks for a European cargo to find its way to Asia.

Among the expected restarts is Czech Unipetrol’s Litvinov cracker, which is due to resume operations in late October. The cracker was shut following a fire almost a year earlier.

Also, Hungarian oil and gas company MOL has shut its Tiszaujvaros butadiene plant for maintenance. The unit, which has capacity to produce 130,000 mt/year of butadiene, was shut in early August and is expected to restart in October.

Over in Italy, Versalis shut its Dunkirk cracker end-August for maintenance and is expected to restart it in October.

It was uncertain if US supply could meet the shortfall in Asia.

Several market sources said a 5,000 mt butadiene cargo for end-November delivery from the US Gulf into China was heard to be offered, but further details could not be confirmed.

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