Oversupply of butadiene from Europe and the US is expected to weigh on the Asian butadiene market in the short term. About 150,000 tons of butadiene shipments from Europe and the United States have been shipped to Asia since the beginning of the year, with most arriving in the Asian market in the second quarter and more expected in July and August.

"In addition to ocean cargoes from Europe and the US, there is butadiene supply from South-east Asia and Japan in the July delivery area, so buyers are still waiting to see," said one trader. But the arbitrage window between Europe and The US and Asia could soon close as demand starts to pick up.

The influx of Butadiene from Europe and the US into Asian markets was triggered by the COVID-19 outbreak. The outbreak has hit the global auto industry, disrupting supply and weakening demand. Butadiene is the raw material of synthetic rubber, including styrene butadiene rubber and polybutadiene rubber, mainly used in the production of tires for the automotive industry.

A shortage of butadiene in The Asian market due to planned and unplanned maintenance stopovers has also prompted suppliers and traders in Europe and the US to export surplus spot butadiene to the Asian market.

The average Asian spot price for butadiene on May 29 was $365 / ton (CFR, Northeast Asia), compared with $345 / ton for naphtha on June 5 (CFR, Japan), according to Actis data. One butadiene supplier said: "There is no profit in butadiene production now. With naphtha almost at parity with butadiene prices, butadiene is unlikely to remain below $400 a ton."