Global butadiene demand may be at an inflection point

Despite widespread fears of a recession, global butadiene demand could reach an inflection point
in the first half of 2023 as prices rise and demand from the U.
S.
market increases.
In 2022, butadiene prices were depressed due to headwinds in the global economy, but the suspension of multiple units in the United States may bring European export opportunities to the United States and Asia in the first half of 2023, which may support more resilient butadiene demand in 2023
.

U.
S.
demand improved due to the shutdown

Market participants expect that in the United States, two large butadiene producers are scheduled to shut down for maintenance in the first quarter of 2023, and one major producer is expected to withdraw from the market due to maintenance in the second quarter, resulting in tight butadiene supply in the region
.
A European butadiene producer said: "The tight supply problem in the United States means that there is an opportunity for European butadiene cargoes to be exported
to the United States in the first quarter.
The market generally expects a more sluggish first half of 2023 and a gradual improvement
in the second half of the year.
This is mainly influenced
by macroeconomic trends.
”

At the end of 2022, European butadiene export prices plummeted as sellers desperately looked for other regions to dispose of excess butadiene
.
Entering 2023, a number of butadiene plants in the United States will be shut down for maintenance, and traders will pay close attention to export opportunities
.
The U.
S.
is expected to receive more butadiene imports from Asia, Europe and other places
.
Since 2021, goods from Brazil, Europe and Asia have flooded into the United States, filling the butadiene supply gap in the US domestic market, especially when
domestic producers are running out of supply due to inspection shutdowns.

However, market participants also expect that the import price of butadiene in the United States in the first half of 2023 will be affected by the triple impact
of limited domestic consumption, large international supply and reduced raw material costs.
Sources believe that market activity in the United States in the second quarter of 2023 will depend on the recovery
of consumer interest.
"If the market continues to move lower and producers complete maintenance and resume work, there will be excess supply and prices will fall
again," said a regional trader.
A US market source said: "Everything is slow at the moment, and it is expected that spot goods will soon catch up with contract prices
.
" However, I think demand on the C4 side has picked up
.
The source said: "Due to the shutdown of multiple units in the United States, the demand for local C4 may increase
.
" He added that prices could rise
if supply tightens in the near future.

The downstream market in Europe and Asia remains sluggish

In Europe, despite the low operating load ratios of producers, the supply-demand imbalance is expected to remain in the first half of 2023 as downstream demand in the region continues to
underperform.
In Asia, market participants expect overall supply to remain high despite the low load operation of steam cracking production, as several new butadiene plants will be commissioned in the first half of 2023
.
Similarly, Asia will also consider exporting excess butadiene cargoes to the U.
S.
in the first half of 2023, but the low load rate of crackers and high logistics rates may limit such opportunities
.

Despite the positive signs, European downstream companies witnessed a decline in demand for key butadiene derivatives such as styrene-butadiene derivatives, acrylonitrile-butadiene-styrene copolymers and adionitrile in the last quarter of 2022, as recession fears across Europe led consumers to purchase less essential and high-priced products, while high input costs due to the European energy crisis also affected the competitiveness
of butadiene derivatives produced on the continent.
Without solutions to Europe's energy needs, the outlook for downstream markets remains bleak
.

Asian butadiene spot demand is likely to start picking up
in early 2023.
Asian steam cracker operators plan to maintain low operating load ratios in 2023, potentially limiting spot exports
from major producers such as South Korea, according to reports.
A market source in Asia said: "Due to the planned reduction of operating load ratio, producers do not have much export volume because they need to meet local customer supply
.
However, market sources said that this demand in Asia may soon disappear because China's willingness to buy is not strong, and there are still a number of new butadiene plants to come online
.
Following the commissioning of INVISTA's new 400,000 mt/year adiponitrile plant in Shanghai, market participants are also closely watching possible butadiene demand
in China.
Adiponitrile is the raw material
for the production of nylon 66.
Market sources said it was unclear whether the new plant would operate at full capacity because Asian automakers were still producing at lower load rates and the outlook for nylon 66 for automotive airbags was sluggish
.