A three-month old arbitrage window to export Asian butadiene to the US that had been slowly closing earlier this month has widened again this week and as a result producers and traders have been heard trying to arrange for butadiene cargoes in large volumes of 3,000-5,000 mt in Asia for US shipment.
Asian butadiene prices on Friday were down $50/mt from April 17 at $1,250/mt CFR China and $1,250/mt CFR Taiwan on low demand. The FOB Korea marker was $45/mt lower at $1,355/mt, while the CFR Southeast Asia marker fell $30/mt to $1,210/mt over the same period.
In the US, butadiene prices were assessed Friday up 1 cent/lb week on week at 80 cents/lb, or $1,764/mt on a CIF basis. Platts last assessed freight for a 5,000 mt butadiene cargo from North Asia to Europe at $350-360/mt.
Considering the current prevailing markets, a trader selling a South Korean origin butadiene cargo to the US would still make a margin of about $60/mt.
"A South Korean producer is heard to be arranging 3,000-4,000 mt of butadiene for June shipment to the US," a trade source said Tuesday.
So far this year, more than 30,000 mt of Asian-origin butadiene for March, April and May shipments have been traded into North America. "The problem now is that there is not much inventory left for shipment to the US.
Most of the butadiene sold from Asia to Europe is of South Korean origin. It may therefore be possible that traders will seek out butadiene for tenders in South Asia and Southeast Asia," another China-based trade source said.
About 4,000 mt of butadiene sold through tenders in Southeast Asia last week were not heard headed to the US. Indian producer Reliance is currently offering 4,000 mt of butadiene for end-May loading through a tender closing early next week.
The window opened first on February 7 with the FOB Korea marker assessed at $1,465/mt and the US Gulf marker assessed at 74 cents/lb, or $1,631/mt on an import parity basis.
The arbitrage opened as the Asian butadiene markets faced a supply glut, with production continuing at near full capacity despite weak downstream synthetic rubber demand, while the US faced a supply crunch with crackers entering turnarounds.
European supplier LyondellBasell also declared force majeure on European butadiene at the same time, furthering limiting supply into the US.
A major share of butadiene in Asia goes into making synthetic butadiene rubber, prices of which had been bearish since February. However, on Friday, spot prices for the 1502 grade were $40/mt higher week on week at $1,840/mt both for CFR Northeast Asia and CFR Southeast Asia on the back of better demand and lower inventories.
SBR 1502 producers who typically need a margin of $550-600/mt over butadiene to break even found some relief this week as the margin stood at about $590/mt according to Friday's assessments.
SBR producers in Asia had been heard running their plants at an average of 60% for the past three months on low margins; if producers raise their operating rates this could support butadiene prices in the continent and lead to the closure of the butadiene arbitrage window to the US.
