FocusAsia BD tumbles on deep-sea arrivals

27 February 2008 04:16  [Source: ICIS news]

By Helen Yan

SINGAPORE (ICIS news)--Asian butadiene (BD) spot values are off their recent peak as sellers offload stocks-in-hand on fears of a price plunge due to the impending arrival of about  40,000 tonnes of deep-sea cargoes into the region in coming months, traders and buyers said on Wednesday.

Spot prices have fallen to around $1,700/tonne (€1,139/tonne) CFR (cost and freight) northeast (NE) Asia for March shipments, down $200/tonne from its early February peak of $1,900/tonne.

“The shore tanks in China are full and we are not hungry for any spot volumes,” a downstream styrene butadiene rubber (SBR) Chinese producer said.

Downstream SBR, thermoplastic elastomer (TPE), styrene butadiene latex (SBL) and acrylonitrile-butadiene-styrene (ABS) makers have stiffly opposed any further BD price hike amid eroding margins and mounting resistance from customers.

“BD spot prices have doubled since the third quarter last year and we cannot absorb the price hikes and pass on the costs to our customers any more,” a northeast Asian SBR producer said.

He added that the company will cut operating rates if the price hikes were to continue.

BD spot prices in Asia have been on an unrelenting upward price spiral since July last year, when prices were around $850/tonne, according to global chemicals market intelligence service, ICIS pricing.

Views, however, were divided on whether there is still room for the Asia BD price to fall further, with some buyers saying that it could fall by another $200/tonne to around $1,500/tonne CFR Asia in the second quarter.

BD supply is expected to ease during the period with the start-up of Yangzi Petrochemical’s new 100,000 tonne/year BD line and the restart of Mitsubishi Chemicals 476,000 tonne/year No 2 cracker in Kashima by April.

Mitsubishi Chemicals’ cracker had been shut down since 21 December when a fire broke out at the site. It was expected to be down for about three months, pending an ongoing internal and official investigation.

Traders and suppliers, meanwhile, said the BD price would stabilise around the $1,700/tonne CFR NE Asia level on high crude and naphtha prices, tighter supply with the upcoming spate of cracker turnarounds in the second quarter and the closure of the arbitrage window.

Crude had surpassed $101/bbl, lifting naphtha prices to around $900/tonne CFR Japan.

Several crackers in Korea and Japan, including Maruzen Petrochemicals, Mitsubishi Chemicals, Sanyo Petrochemical and Lotte Daesan will also shut in the second quarter for maintenance, crimping BD supply.

“Furthermore, the deep-sea supply from Europe or the US will dry up as prices in these regions are expected to increase amid tighter supply. The huge price disparity between Asian and European and US prices will disappear and the arbitrage window will be shut,” a Chinese trader said. 

The arbitrage window was opened recently when spot prices in Asia surged past $1,800/tonne CFR NE Asia in January, more than $500/tonne higher than Europe and the US Gulf.

($1 = €0.67)

By: Helen Yan
+65 6780 4359

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