US demand for butadiene (BD) is expected to increase in January, but buyer sentiment for the remainder of the first quarter remains uncertain.
Inventory restocking in January is expected to draw down excess supply and provide near-term price support, according to market participants. Derivative manufacturers aim to rebuild inventories following earlier-than-normal destocking initiatives this year. Many buyers employ standard inventory control management strategies to avoid paying higher end-of-year inventory taxes, particularly in Texas. Others cut costs to improve year-end financial statements.
Domestic demand in February and March is less clear, as market participants question whether the market will rebound from persistently low demand at the end of 2024.
US BD prices on a contract basis fell by 12pc duringthe fourth quarter, owing to weak demand and oversupply. Demand was depressed by BD consumer turnarounds in October, seasonal slowdowns between November-December and trade pressures tied to derivative imports.
US tire shipments this year are expected to rise by 2.1pc to 338.9mn units, surpassing the record set in 2021, according to the US Tire Manufacturers Association. However, market participants along with US trade data reference a jump in tire imports from Asia-Pacific. Both Bridgestone and Goodyear have said low-cost tire imports and structural changes in segment profitability across the Americas are eroding their market share, fueling capacity rationalization, asset sell-offs and plant closures in the region.
Acrylonitrile butadiene styrene (ABS) is another segment at risk of stronger competition from low-cost, Asia-origin imports. Ineos Styrolution plans to permanently shut down its ABS plant in Addyston, Ohio, in 2025 because the facility cannot compete with imported material.
"Over the past few years, we have seen the ABS market become increasingly competitive, particularly with growing competition from overseas imports," Ineos Styrolution chief executive Steve Harrington said in late October.
Protectionist trade policies are likely to be a feature of president-elect Donald Trump's second administration, potentially altering business investment decisions and durable goods trade flows.
Even if demand does not improve, planned maintenancein the first half of 2025 is expected to tighten BD supplies. A heavy turnaround cycle for steam crackers will concentrate in the first and second quarters, constraining availability of feedstock crude C4.
One integrated US Gulf coast producer plans to enforce BD allocations while its assets are offline for planned maintenance.
A separate, non-integrated producer has not announced BD sales controls, based on feedback from its customers. This same BD supplier was short on feedstock supplies for parts of this year, with the crude C4 merchant market illiquid in North America. A third producer has scheduled a cracker turnaround starting in January, but no indications emerged that would limit term volumes from its BD unit.
Reduced BD supply during cracker maintenance is likely to pull volumes away from the export market until the second half of 2025.
Export spot cargoes in the fourth quarter more than doubled from the third quarter, serving as a critical outlet to clear the domestic market of surplus BD supplies, even as lower export prices pressured US margins.
