The Europe-Asia butadiene arbitrage window that saw cargoes fixed for export last week has now closed due to the correction in Asian prices amid a rise in imports from Brazil, Iran, the US, and Europe, European traders said.
Last week, export prices in Europe were assessed by Platts at $1,245/mt FOB Rotterdam, down $65/mt compared to last week, as European suppliers lowered their offers amid weaker Asian values.
Spot FOB Rotterdam prices were assessed by Platts at $1,245/mt on Tuesday.
Weekly CFR Taiwan prices jumped to $1,625/mt on July 25, up from the July 18 assessment of $1,555/mt, according to Platts data. At the same time, FOB Rotterdam prices climbed to $1,320/mt, up from $1,299/mt.
A trader said that it had tried to secure further volumes but little was available at prices low enough to make the arbitrage work.
A second trader said that it had fixed one vessel at the end of last week but that the “window was now closed as Asian prices have dropped.”
Sources in Europe said that freight between Europe and Asia currently was pricing in the low $300s/mt. One said that vessel space would be pricing at around $320/mt.
As a result of freight between Europe and Asia at around $300-350/mt and CFR Taiwan prices at $1,625/mt, European traders rushed to fix cargoes with netbacks seen at around $1,300/mt FOB.
But with Asian butadiene prices down last week, European offers were still seen this week at $1,300/mt FOB Rotterdam, which were now considered unworkable.
European suppliers this week said they were now unable to supply further material to exporters at lower prices, with offers staunchly holding at $1,300/mt
“Lavera [material at] $1,300/mt … was offered to me last week,” a second trader said. As to whether this value would trade again this week, a third trader said he would not.
“At these prices [$1,300/mt], it doesn’t make sense,” the first trader said. With Asian material at $1,565/mt CFR Taiwan and freight to Asia of around $320/mt, European net-back prices should be at $1,200/mt.
According to a fourth trader, a total of around 12,000 mt of butadiene had been fixed for export to Asia, split between three vessels. The Norgass Conception contained approximately 3,500 mt, the Prince Johan Willhelm Frisso contained around 2,500 mt, while the Transiberia contained about 6.5 mt, according to the trader.
The fourth trader felt that Asian prices were expected to continue under pressure.
“Still very weak sentiment there. [Derivative Asian styrene-butadiene rubber] buyers wait and see even though there are offers at $2,000/mt,” the trader said.
In addition, cheaper natural rubber, of which there were still high stocks, was seen replacing synthetic rubber in tire and other applications, while Asian butadiene extraction rates were still high, the trader said.
– Platts.com
