Asian butadiene-naphtha spread hits 7-year high on tight supply

The Asian butadiene-naphtha price spread hit a seven-year high of $2,557.38/mt CFR last Friday amid extremely tight supply globally and strong demand for downstream products such as styrene-butadiene-rubber, SB latex and acrylonitrile-butadiene-styrene, S&P Global Platts data showed.

The last time the spread was wider was March 1, 2012, at $2,817.75/mt CFR, Platts data showed.

On Friday, butadiene spot prices stood at $3,070/mt CFR China -- a 56-month high -- and naphtha prices at $512.625/mt CFR Japan.

Market sources attributed the wide spread to tight supply and strong downstream derivative demand.

A decline in deepsea cargo availability from the US and Europe has also supported butadiene prices. Evonik's Marl butadiene unit in Germany and its Antwerp facility in Belgium were expected to go offline in January.

Both units were expected to be down for 10-12 days this month, though it was not clear when, Platts reported earlier.

In Asia, butadiene is typically extracted from crude C4, sourced from from naphtha-fed steam crackers. Typically conversion costs from naphtha to butadiene are in the range of $300-$500/mt, with integrated petrochemical complexes at the lower end.

On the supply side in Southeast Asia, at least three butadiene extraction units are scheduled to undergo planned maintenance over January to March, including Thailand's IRPC and Malaysia's Lotte Titan Chemical.

In Northeast Asia, Taiwan's CPC will shut a unit February to April.

Looking forward, most market participants were not confident that spreads would continue to remain this wide, and expected prices to come down.

"If prices continue to remain high, styrene-butadiene producers might have to shut down as their feedstock is more expensive than their finished product," a market source said.

Several market participants said some synthetic rubber producers had sold off their butadiene feedstock as this was more profitable than making finished products from it.