Asia butadiene rubber offers soar to $3,000/t

25 January 2008 03:47  [Source: ICIS news]

By Helen Yan

SINGAPORE (ICIS news)--Butadiene rubber (BR) spot offers in Asia rose to a fresh record of $3,000/tonne CFR (cost and freight) Asia for February shipments, driven by a relentless upward spiral in butadiene (BD) feedstock price, producers said on Friday.

"We have already achieved $2,900/tonne CFR China and our latest offer is $3,000/tonne CFR China, a South Korean producer said.

"We have no choice but to hike BR prices due to cost pressure from the escalating BD feedstock price, which is going up by nearly $100/tonne every week."

BD spot prices in Asia have surged more than $300/tonne in the past month to climb above $1,800/tonne CFR northeast Asia (NE Asia).

Tighter-than-expected supply due to naphtha cracker outages, production issues and a delay in the start-up of Titan Chemical’s new 100,000 tonne/year BD unit in Asia have fuelled the BD price upsurge in recent weeks.

The skyrocketing BD price has also prompted some BR producers to cut operating rates, further adding fuel to fire in a tight market.

The $3,000/tonne price tag for spot cargoes will be about $800-900/tonne higher than first quarter contracts.

The contracts were settled at $2,050-2,200/tonne CFR Asia, depending on the time they were settled, cargo size, terms and conditions, according to global chemical market intelligence service ICIS pricing.

End-users, in particular, the large downstream tyre producers, have been up in arms against the unabated BR price increases, saying that the latest hike is not acceptable and is unhealthy for the industry in the long-run.

Despite the $3,000/tonne CFR Asia price tag announced by the Korean producer, some downstream tyre producers and shoemakers said they were able to secure BR at lower prices of $2,400-2,800/tonne CFR Asia.

"We will cut BR consumption and switch to other substitutes and secure BR from Europe and the US," a major downstream tyre producer said, adding that he could procure BR at around $2,400/tonne CFR Asia on a spot basis from Europe.

However, other end-users including small and medium-sized footwear manufacturers in Taiwan, Vietnam and Indonesia, were under pressure to accept higher prices as supply was tight.

"We have already sold some small lots of BR at $2,800/tonne CFR to some shoe manufacturers in Vietnam. Although they were very unhappy about the price, they had no choice but to pay this price as there is very limited supply and they have to keep their plants running," a Singapore trader said.

A medium-sized Indonesian end-user said: there was hardly any stock around in Asia. He added that he was scouting for Russian cargoes and hoped to be able to buy them at below $2,400/tonne CFR Indonesia.

Another Taiwanese shoemaker was also looking to procure BR to keep its plant running, but so far, he has been unsuccessful.

Major Asian BR producers include Zeon, JSR, TSRC, Korea Kumho Petrochemical Co (KKPC), Bangkok Synthetics Elastomers (BSTE) and LG Chem.

Tyre producers include Bridgestone, Michelin, Hankook Tires, Apollo Tyres, Balkrishna Tyres and Silverstone.

By: Helen Yan
+65 6780 4359

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