HIPS prices mounting on surging costs of feedstock butadiene

Since the start of 2010, butadiene prices have been following a bullish trend on the back of snug supplies caused by production problems, as per Chemorbis. As a result, the downstream chain of butadiene has been affected strongly. In Europe, butadiene spot prices have gained a significant €625/ton FD NWE basis since the beginning of January, and are currently pegged at €1590-1600/ton with the same terms, gaining a €40/ton increase on the week. The European butadiene contract for Q2 rose by €350/ton over the first quarter to €1275/ton, FD basis as restricted avails continue while production issues continue. April price settled with a €225/ton increase at €1350/ton on FD NWE basis in the monthly contract. At the start of April, SABIC lifted the force majeure at its 135,000 tpa Netherlands butadiene plant but the force majeure continues at their UK butadiene plant that is not expected to resume operations until May. Ineos and Total’s Lavera plants will be shut in mid-April for about two weeks for maintenance. The producers’ German plants will also not operate during May for nearly three weeks. In USA, spot butadiene prices gained US$683-705/ton since the beginning of January to reach US$2204-2248/ton at the start of April. The April butadiene contract rose by US$176/ton to settle at US$1851/ton. The early April contract nominations saw increases as high as US$330/ton due to the significantly higher spot market. According to some players, producers did not want to destroy the demand by raising their prices too much. Meanwhile, the overall supply situation is exceptionally tight in the region and buyers can hardly find any spot materials. In Asia, spot prices gained US$141-149/ton since the beginning of 2010 rising to US$2050/ton, FOB Korea on April 1st. Such increases have led to buyer’s resistance, but sellers are unwilling to yield from their firm stance, pointing to the tight supplies. As a result of this situation, most converters have started to reduce operating rates instead of purchasing at the current high levels. Meanwhile, an increasing number of HIPS producers have started to talk of raising the traditional premium between GPPS and HIPS prices in most regions. European producers aim to raise the premium by €70-80/ton while Asian producers have already started to lift their HIPS offers by US$5-15/ton on the back of the higher production costs while leaving their GPPS offers stable for the time being. In spot PS prices, Asian HIPS prices are currently caring a US$100/ton premium over GPPS offers to China due to the situation.