European butadiene (BD) supply is growing on the back of the traditional summer slow down in demand on the domestic market and planned derivative maintenances.
However, export demand from the US which had cooled considerably during the past six-to-eight weeks is now showing signs of re-emerging. However, it is too early to accurately determine the extent of this interest.
Domestic consumers reiterate they are covered through August and potentially in September too, depending on downstream demand levels. They say suppliers continually offer incremental tonnes. There are concerns over whether derivative demand will return to Q2 levels, given the macro-economic uncertainties, but it is simply too early to tell.
BD production in the second quarter fell by 5.3% from Q1, according to the latest statistics published by the Association of Petrochemicals Producers in Europe. However, the figures also showed an almost 3.5% increase compared with Q2 2010.
Upstream
Crude oil prices remained volatile during the week. The inability of US law makers to reach a consensus regarding its self-imposed debt ceiling and a rise in US crude stocks mid-week provided downward pressure to WTI values. However, there was some short-lived bullish momentum in the market after US oil-and-gas facilities were affected by tropical storm Don. ICE Brent prices were steady for most of the week, supported by a weaker dollar. However, continued concern over European debt issues capped gains.
On Friday afternoon, September Brent was trading around $116.70/bbl, down from the previous week’s close of $118.67/bbl. September WTI was trading around $95.95/bbl, down from $99.87/bbl.
European naphtha cargo prices were relatively stable for most of the week, before slipping to $982-990/tonne CIF NWE on Friday afternoon. Arbitrages remain closed to the US and Asia, although some material moved west regardless. There was less demand than expected from the gasoline industry, while opinions from the petrochemical sector regarding the level of interest in naphtha were mixed. This week's range of $982-1,006/tonne CIF NWE compares with a range of $974-1,010/tonne the previous week.
Downstream
European August styrene butadiene rubber (SBR) contract negotiations are under way. Buyers are seeking a rollover, but producers say another increase is inevitable because of rising feedstock costs. Buyers said they wanted a rollover because demand is lower and supply has much improved compared with three months ago.
A predicted hike of about €100/tonne for monthly styrene barge contracts has led European acrylonitrile-butadiene-styrene (ABS) producers to target August contract increases. ABS manufacturers will wait until styrene has settled before offering firm numbers for August, but are confident of implementing an increase given cost movements during July. A couple of buyers admitted prices are likely to rise slightly, but not as much as producers would hope, as demand is currently weak because of the traditional August shutdown period.
Cracker update
European contract cracker margins based on naphtha feedstock continued their downtrend, falling by €7/tonne in the fourth consecutive week. Margins remain at their lowest level since end-April.
Naphtha prices rose $20/tonne in the week ending 22 July, but this was partially offset by a 1.5% weakening of the US dollar against the euro, which led to only a 0.5% increase in costs.
Spot naphtha margins slipped by €33/tonne to their lowest since the end of 2010. Rising feedstock costs and lower propylene and butadiene (BD) prices offset firmer spot ethylene values.
Contract cracker margins based on liquefied petroleum gas (LPG) were flat.
Naphtha retains the advantage over LPG, but this is only €15/tonne, compared with €22/tonne last week. However, at least one European cracker operator said it’s feedstock slate had shifted entirely to LPG, and that it assumed others had done the same, where possible.
Cracker operators are tweaking feed slate and severity levels to optimise production in favour of ethylene. Several sources said their crackers are running well at reasonably high rates. There was a suggestion that rates might even be increased given the better-than-expected ethylene supply-and-demand balance, but there is no clear consensus on this.
The status of Repsol’s 660,000 tonnes/year ethylene cracker at Tarragona, Spain, is unclear this week. It was running at reduced rates last week because of minor technical issues.
BPRP’s 500,000 tonnes/year No 4 ethylene cracker at Gelsenkirchen, Germany, was back online and on-spec on 24 July as expected.
Some problems were erroneously reported at Borealis’s Stenungsund, Sweden, cracker late on Friday, but these are now thought to relate to a derivative unit at the site instead. No further details could be confirmed.
Petkim’s Aliaga cracker in Turkey has restarted following planned maintenance, according to sources. Direct confirmation was not available. The cracker has the capacity to produce 520,000 tonnes/year of ethylene.
Polimeri Europa’s 490,000 tonne/year ethylene cracker at Porto Marghera, in Italy, is due to restart early next week. This marks a delay of around two weeks. Its sister subsidiary Syndial has shut down its 250,000 tonne/year ethylene cracker at Porto Torres in Sardinia.
There are still unconfirmed reports this week that one of Hungarian producer TVK’s two crackers at Tiszaujvaros is down because of technical problems. This could not be confirmed.
Further forward, planned shutdowns will get under way at the following sites: these have not been confirmed by the companies concerned.
INEOS’s KG cracker at Grangemouth, in the UK, for four weeks in August, its No 4 cracker at Dormagen, near Cologne in Germany, in September-November, and its G4 cracker, also in Grangemouth, from September to October.
ExxonMobil’s 830,000 tonnes/year ethane cracker at Mossmorran, in the UK, will be down in September.
Total’s cracker at Gonfreville, France, is due to go into a six-to-seven week maintenance in September.
Unipetrol’s Litvinov cracker in the Czech Republic is also due to go into maintenance in September.
BD extraction
European BD extraction units are running well, according to market sources and no problems have been reported this week.
Planned maintenance is due to take place at INEOS’s Grangemouth, UK, unit and Total’s Gonfreville, France, unit from September. These have not been confirmed directly.
