MOSCOW (MRC) -- Global butadiene demand is expected to continue to recover in the first half of 2021, in line with increasing downstream tire and automobile production. However, Asia's spot demand may slow down in line with rising butadiene capacities, reported S&P Global.
"Petrochemical demand has remained resilient," Enterprise Products Partners' co-CEO Randall Fowler said in its third quarter earnings call. This was seen in butadiene and its derivatives in the latter part of 2020.
In the early part of the year, the COVID-19 pandemic slashed downstream tire and automobile plant operations, impacting the global butadiene market. In order to clear excess supplies, European suppliers actively exported cargoes to Asia, which pushed Asian butadiene prices to an all-time low in May 2020, according to S&P Global Platts data.
However, the butadiene market started to rebound in the fourth quarter of 2020, driven by multiple butadiene plant hiccups in Asia. In Europe, market sources have said that the bull run seen in the fourth quarter will continue into the first quarter of 2021, pulled by strong buying appetite in Asia.
In Malaysia, Pengerang Refining and Petrochemical, or PRefChem, plans to restart its 180,000 mt/year butadiene plant in Johor in Q1 2021 following a fire at its refinery in March 2020.
There are additional capacity increases expected in China, South Korea and Thailand.
Market sources said butadiene exports from China could increase in 2021 in line with rising capacities. In 2020, ex-China exports were heard mainly to South Korea. According to Korean customs, Korea imported around 4,000 mt of butadiene from China between January and October, two times more than a year earlier.
In the US, market participants predict continued strength in pricing in H1 2021 due to the ongoing curtailment of supplies following TPC Group's explosion at its Port Neches butadiene unit during the Thanksgiving holiday in 2019 and increased demand from the automobile industry.
In early 2021, there will be many challenges for butadiene supply and the US will need to compensate through imports as automobile demand spikes, market sources said.
The Association of Natural Rubber Producing Countries (ANRPC) forecast a 4.9% drop in global natural rubber supply in 2020, when compared with 2019.
Goodyear Tire & Rubber Company CFO Darren Wells said higher costs for butadiene and natural rubber were "the kind of snapback in price that we would expect... the industry is ramping up production or getting production back to pre-COVID levels."
Wells noted that, if production holds at current levels, the company could see raw material costs rebounding to 2019 levels.
In Europe, sources expected demand to continue to gradually improve, though remained wary about a widespread recovery in the synthetic rubber sector until the COVID-19 pandemic abated.
European synthetic rubber markets are expected to remain primarily driven by exports to Asia, initially with high run rates seen at the end of 2020 due to an open arbitrage east, amid stagnant domestic demand.
"There is a big question mark for next year. For a (tire market) return to pre-COVID levels, the 2024-2025 scenario is the pessimistic scenario and 2022 is the optimistic," one butadiene consumer said.
Market sources said butadiene demand should also come from ABS and NB latex, both of which have been enjoying positive margins, despite butadiene price rises in Q4 2020. NB latex has seen a boom from its use in medical gloves, with ABS also benefitting from medical applications.
In the European ABS markets, the lack of import volumes that drove market developments in H2 2020 is expected to continue in the opening months of 2021, fueling demand for domestic product, unless further coronavirus restrictions halt automotive and consumer appliance production. The return of imported material from Asia could rebalance the market but remains contingent on the gap between European and Asian ABS prices closing.
As MRC informed before, PrefChem received commercial ethylene and propylene at its new cracker in Pengerang on 13 September, 2019.
Butadiene is the main feedstock for the production of ABS.
According to the ICIS-MRC Price Report, January-September ABS imports to Russia increased by 3% year on year to 25,300 tonnes from 24,500 tonnes. The share of South Korean supplies was 63% (16,000 tonnes) versus 56% (13,600 tonnes) in January-September 2019.
MRC