FocusAsia BD may have peaked at $1,900/t

06 February 2008 04:23  [Source: ICIS news]

By Helen Yan

SINGAPORE (ICIS news)--Butadiene (BD) spot prices in Asia may have peaked as resistance to unrelenting price spikes gathers momentum, traders and buyers said on Wednesday.

BD spot prices have soared to a record-high $1,900/tonne (€1,292/tonne) CFR (cost and freight) NE (northeast) Asia, with some small lots sold around this level to downstream butadiene rubber (BR) or acrylonitrile-butadiene-styrene (ABS) producers.

However, the rest of the consumers from among downstream styrene butadiene rubber (SBR), thermoplastic elastomer (TPE) and styrene butadiene latex (SBL) makers said they cannot continue to absorb soaring BD costs and have threatened to cut operating rates.

BD spot prices have shot up by some $600/tonne from November, when they hovered around $1,300/tonne. The unabated rise is fuelling resistance from end-users, which have started to reject spot offers above $1,800/tonne.

“Any spot offer above $1,800/tonne CFR is unworkable as our margins have been severely squeezed. We will consider cutting the operating rate of our SBL plant if the BD price continues to go up,” a SBL producer said.

“We cannot absorb the high BD costs as SBR prices in China are now starting to soften,” a Chinese SBR producer said, adding that BD spot prices are expected to fall when deep-sea cargoes arrive in Asia.

More than 40,000 tonnes of deep-sea BD cargoes from Europe and the US are expected to arrive in Asia in the coming months until April and talk has been circulating the market that some traders with deep-sea cargoes are still seeking customers.

“Yes, we have heard that some traders are looking for customers to offload their deep-sea cargoes,” a Japanese trader said, adding that prices are unlikely to rise any further as it may not be healthy for the market in the long run if prices rise and fall sharply.

The BD price upsurge has been driven by a supply crunch that happened at a time when demand has been rising following expansions in the downstream SBR and ABS sectors.

Korea Kumho Petrochemical Co (KKPC) expanded its SBR capacity by another 110,000 tonnes/year in Ulsan last November while ABS capacities amounting to more than 500,000 tonnes/year came on-stream last year in China.

Chi Mei and Grand Pacific Petrochemicals Corp raised their ABS capacities in Zhenjiang, China, by 100,000 tonnes/year each.

Formosa Chemicals & Fibre Corp (FCFC) increased its ABS capacity in Ningbo by 150,000 tonnes/year while Jilin Petrochemicals started up its 180,000 tonne/year unit last year.

Unfortunately, the BD supply did not keep up with the pace of expansions in the downstream SBR and ABS sectors.

The delayed start-up of Titan Chemical’s new 100,000 tonne/year BD unit in Pasir Gudang, Malaysia and the unexpected shutdown of Mitsubishi Chemical’s 476,000 tonne/year No 2 cracker at Kashima, Japan following a fire on 21 December sparked off the relentless rounds of price spikes.

Titan’s unit was expected to come on-stream in December but its start-up was delayed to the end of January.

Meanwhile, worries that Mitsubishi Chemical might be down for about three to four months further added fuel to the fire – lifting prices sky-high to $1,900/tonne in the meantime.

($1 = €0.68)

For more on butadiene visit ICIS chemical intelligence

By: Helen Yan
+65 6780 4359

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