FocusTight supply keeps Asia NBA on uptrend

04 October 2007 05:29  [Source: ICIS news]

By Kew Jia Hui

SINGAPORE (ICIS news)--Scarce spot cargoes coupled with better buying sentiment are driving up Asian n-butanol (NBA) prices, producers and traders said on Thursday.

Production problems at a Japanese maker and outages at other plants have tightened spot supply. Impending shutdowns at Korean maker LG Chem and Malaysian producer Optimal Chem’s plants are expected to further squeeze supply in the last quarter of this year.

Reflecting the tight supply over the last two months, China’s NBA imports fell 20.3% to 17,529 tonnes in August compared with July volumes, according to statistics from China Customs. Imports in July were similarly on a decline, down 27.6% from June.

Demand from the downstream acetate and acrylate markets in China, however, firmed due to the peak production season. This is expected to continue until November, fuelled by the increased need for consumer goods for the festive season.

Both factors pushed NBA spot prices up $50/tonne, or 3.5%, since early August to $1,460-1,480/tonne CFR (cost and freight) northeast (NE) Asia last Friday, according to global chemical intelligence service ICIS pricing.

Domestic prices saw a similar increase of 3.8% to yuan (CNY) 13,600-13,700/tonne ($1,811-1,824/tonne) ex-tank in eastern China over the August-September period.

The situation has been improving from July when domestic prices were at a nine-month low as downstream demand grounded to a near halt when cuts in export tax rebates kicked in.

Export volumes of end-products such as furniture were reduced as producers negotiated price hikes to compensate for the cut in tax subsidies. Acetates are used as a raw material for car and furniture coatings while acrylates are used in paints and emulsions.

“Demand for acetates is better now compared to July, but is still lacklustre in comparison to last year. For now, we are able to accept the slow increase in NBA prices due to the tight supply situation, but we hope downstream prices will increase in tandem,” said a Chinese acetate maker in Mandarin.

Both producers and end-users predicted a stable-to-firm trend when buyers returned to the market to purchase cargoes after the National Day holidays in China this week.

“Market sentiment is definitely stronger, with traders also actively looking for cargoes. With the price gap between domestic prices and imported cargoes narrowing, they see an opportunity for trade. Most traders foresee an uptrend in the next (few) months and are willing to bet on it,” said a distributor based in Hong Kong.

($1 =CNY7.51)

By: Kew Jia Hui
+65 6780 4359

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