FocusAsia Q4 BR contract talks hinge on BD

05 September 2008 07:45  [Source: ICIS news]

By Helen Yan

SINGAPORE (ICIS news)--The butadiene (BD) feedstock price will be the key issue in deciding the fourth-quarter butadiene rubber (BR) contract price, Asian producers said on Friday.

Asian BR makers are bracing themselves for difficult fourth quarter contract negotiations as downstream tyre producers have strongly opposed any price hikes.

BR producers have nominated $4,000-4,300/tonne CFR (cost and freight) Asia for fourth quarter contracts against buying indications firmly pegged below $4,000/tonne.

Some downstream tyre producers had suggested $3,500/tonne, saying that a slowing global economy would mean poor sales and weaker margins.

The wide buy-sell price gap had hampered fourth quarter negotiations.

“The key issue to the fourth quarter contract settlement is the feedstock butadiene (BD) and we will adjust our fourth quarter contract nominations accordingly once the BD price direction is settled,” a Korean producer said.

“At the moment we have no choice but to keep our fourth quarter contract offers at a minimum of $4,000/tonne as the BD price jumped up significantly earlier in the third quarter,” he added.

BD surged by more than $400/tonne in the month of July to peak at $3,400/tonne CFR northeast (NE) Asia.

However, the downstream tyre makers were not convinced by the argument, saying that feedstock was not the key issue as demand for tyres was expected to weaken in the fourth quarter in light of the slowing global economy.

“We expect demand for automobiles and tyres to fall in the fourth quarter and some tyre producers had already cut operating rates,” an Indian tyre manufacturer said.

In light of the uncertainty over the BD price, a Japanese BR producer, had, instead, proposed to settle on a monthly basis.

“BD supply is tight in Japan, given the cracker shutdowns and we have proposed to settle the BR contracts on a monthly basis instead due to the limited BD supply in Japan,” he said.

In the meantime, both buyers and sellers are closely watching the feedstock BD market.

Please visit the complete ICIS plants and projects database

To discuss issues facing the chemical industry go to ICIS connect

By: Helen Yan
+65 6780 4359

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.

Printer Friendly