FocusAsia butadiene to rise further in December

04 December 2007 03:57  [Source: ICIS news]

By Helen Yan

 

SINGAPORE (ICIS news)--Asia butadiene (BD) spot prices are poised to rise further in December on tighter-than-expected supply and robust demand, with sellers targeting more than $1,400/tonne CFR (cost and freight) northeast Asia (NE Asia), producers and traders said on Tuesday.

 

“The market is very tight and we are sold out for most of December,” said an official at Yeochun Naphtha Cracking Centre (YNCC), Korea’s largest olefins producer.

 

He added that it had only spot cargo available for end-December or early January loading at $1,400/tonne FOB (free on board) Korea.

 

This was around $1,470-1,480/tonne CFR NE Asia, after taking into account intra-regional freight costs at $70-80/tonne.

 

“We have received many enquiries from customers who are looking to buy spot cargoes, but unfortunately, we do not have any spot cargo,” a Korean trader said.

 

The spike in BD spot prices is due to the unexpected delay in commericial operation at Titan Petrochemical’s new 100,000 tonne/year unit in Johor, Malaysia from December to January.

 

The delay crimped supply just when downstream styrene butadiene rubber (SBR) producer Korea Kumho Petrochemical started up its new 110,000 tonne/year line. Titan was contracted to supply Kumho 50,000 tonnes of BD each year.

 

The delay fuelled higher spot offers, with some traders saying that spot prices may rise to as high as $1,500/tonne CFR NE Asia in January 2008, given the strong downstream SBR and butadiene rubber (BR) markets.

 

“There is still room for the BD price to go higher as the downstream SBR and BR markets are very strong, with SBR and BR prices rising to more than $2,000/tonne CFR. End-users can pay higher than $1,400/tonne,” a trader said.

 

Asia BD spot prices have risen by about $400/tonne in the past three months. September spot prices hovered around $1,000/tonne CFR NE Asia but have risen sharply in recent months to hit $1,400/tonne CFR for December shipments, according to global chemical market intelligence service ICIS pricing.

 

The recent surge in BD spot prices has taken many buyers by surprise as they have expected prices to soften at the end of the year.

 

Buyers were also expecting deep-sea material from Brazil to head towards Asia in December, but tight vessel space and rising freight costs have closed the arbitrage window.

 

“Vessel space is very tight and it is not possible to bring in deep-sea material into Asia now, with freight costs above $400/tonne compared with around $300/tonne last year,” a Korean trader said.

 

Despite strong SBR and BR prices, synthetic rubber producers were unhappy about soaring BD values.

 

“The price hikes are too sharp and can also fall sharply when supply eases,” a Chinese SBR producer said.

 

A Korean SBR producer said: “Any price higher than $1,400/tonne CFR NE Asia for December is not workable.”

By: Helen Yan
+65 6780 4359

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