Asia BD to rebound in Apr on cracker cuts

18 March 2008 02:57  [Source: ICIS news]

By Helen Yan

SINGAPORE (ICIS news)--Butadiene (BD) spot prices in Asia have bottomed out and are likely to rebound in April as demand strengthens amid a spate of cracker cuts and turnarounds in the second quarter, traders and producers said on Tuesday.

BD spot prices have tumbled to around $1,650/tonne (€1,056/tonne) CFR (cost and freight) northeast (NE) Asia, down about $250/tonne from its early February peak when spot offers escalated to $1,900/tonne.

“Deep-sea supply from Europe and the US has dried up and several naphtha cracker operators in Asia have cut operating rates which will reduce the BD supply at a time when demand is likely to emerge and pick up,” a Korean trader said.

South Korea’s SK Energy, Taiwan’s CPC Corp, Indonesia’s Chandra Asri and Thailand’s Rayong Olefins have already slashed operating rates by about 20% due to the recent spike in crude and naphtha values.

The latest to consider cutting operating rates is South Korea’s largest olefins producer, Yeochun NCC (YNCC), which may scale back production 10-15%, a company source said.

He added that margins had been squeezed by the soaring crude and naphtha values.

Crude has surged past $110/bbl while naphtha has climbed above $915/tonne CFR Japan.

“We will see the BD price recover in April as buyers return to the spot market to secure additional product in a tightening market,” a Korean producer said, adding that rising demand and tight supply will boost prices in the second quarter.

“We have hiked our spot offers for end-April and early-May cargoes to $1,850/tonne FOB (free on board) Korea,” he added.

The second quarter is traditionally a high demand season for BD as downstream styrene butadiene rubber (SBR), butadiene rubber (BR), acrylonitrile butadiene rubber (NBR) and acrylonitrile-butadiene-styrene (ABS) producers usually ramp up the operating rates during this time.

Meanwhile, Korea Kumho Petrochemical Co (KKPC) has decided to postpone its SBR and BR  turnarounds and instead run both the 222,000 tonne/year BR plant in Yeosu and 371,000 tonne/year SBR facility at Ulsan in April although they were originally expected to shut that month for maintenance.

“It is in the interests of the downstream synthetic rubber producers to bolster the BD price, as any further price decline will hinder their efforts to seek a significant price increase for their second quarter contracts,” a Korean trader said.

SBR and BR producers have sought a hefty 20%-25% hike for their second quarter contracts but negotiations have recently stalled as major tyre manufacturers put up a stiff resistance, saying the recent sharp price in decline in BD should be factored into the price hikes.

($1 = €0.64)

For more on BD visit ICIS chemical intelligence

By: Helen Yan
+65 6780 4359

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