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European Petrochemicals Outlook 2015

A News & Data Feature

New capacity to squeeze European butadiene prices further

January 15, 2015 -- By Nandita Lal in London

New capacity due online in 2015 will add further pressure to butadiene prices, in what is already a weak market.

Butadiene FD NWE CP (Eur/mt)

The butadiene contract price was settled at Eur675/mt ($805/mt) for January, down Eur100/mt from December -- a five-and-a-half-year low for the CP and a far cry from its historic high of Eur2,100/mt FD NWE in October 2011.

This year, Germany's Evonik's butadiene capacity in Antwerp, Belgium is set to increase by 100,000 mt/year in the second quarter.

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Austria's OMV will set up a new 60,000 mt/year butadiene extraction plant at its Burghausen, Germany, facility in Q1-Q2.

And Hungarian Tisza Chemical Group is aiming to start production at its new 130,000 mt/year butadiene extraction unit in Tiszaujvaros in Q2.

The collapse in demand for butadiene has been driven by abundant natural rubber supplies for which it is a substitute, slow global economic growth and a fall in Asia's import appetite as it led its own capacity expansion drive in butadiene with prices at historic highs in 2011.

Plummeting prices for feedstock naphtha -- which this week plunged below the $400/mt mark -- mean strategic decisions like whether to import US ethane for European crackers will be more difficult, as the price advantage narrows, and calling into question the expectation that European butadiene supply would shrink as a direct result.

Cracking the rival feedstock does not yield butadiene.

Ineos, Sabic and Borealis have already committed to bringing US ethane to their European operations.

Shell and Versalis said in October they would also import US ethane for their European steam crackers.

Last year, Versalis said it suspended plans to build a 70,000 mt/year butadiene production unit at its Dunkirk plant in France, while Ineos shut its existing butadiene facility at its Grangemouth plant in Scotland.

As analysts told Platts recently, the current oil price environment, with crude trading at near six-year lows, makes the decision to import US ethane in the future much more difficult for European cracker operators.

"In this environment you are going to wait and see how oil prices [pan] out," said EnVantage analyst Peter Fasullo said.

Next article: Struggling currency, crude oil collapse to weigh on Europe's SBR market

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