FocusAsia BD may fall below $1,000/t by end Dec

28 October 2008 07:49  [Source: ICIS news]

By Helen Yan

 

SINGAPORE (ICIS news)--Asia butadiene (BD) spot prices may continue spiralling down to below $1,000/tonne by yearend, as buyers retreat from the market amid a looming global recession, traders and buyers said on Tuesday.

 

Spot offers plummeted to $1,500/tonne CFR NE Asia last week, a hefty 50% fall from $3,000/tonne CFR NE Asia in September, according to global chemical market intelligence service, ICIS pricing.

 

Traders said there is still room for BD to fall to $900/tonne cost and freight (CFR) northeast (NE) Asia soon despite the recent sharp price correction given rising inventories and shrinking demand.

 

“We expect BD to fall further to a three-digit number by the end of this year as there are too many cargoes and too few customers,” a Korean trader said.

 

BD spot prices have plunged by $400-500/tonne week-on-week in the past month, dragged down by falling crude and naphtha values, while spot supply surged as buyers defaulted on payments and rejected cargoes contracted earlier at a much higher price.

 

Nymex crude has dropped to around $62/bbl, about 60% lower from its peak of $147/bbl in July, while naphtha has plunged to around $350/tonne CFR Japan.

 

“Buyers are rejecting cargoes contracted earlier at much higher prices and this has worsened the situation as it has freed up so many cargoes in a bear market amid the global credit crisis,” another trader said.

 

The depreciation of some Asian currencies, including the Korean won against the US dollar and the slump in the  rubber and plastics market have accelerated the  downward price spiral.

 

“We are not buying any spot cargo for the fourth quarter as we have no requirements to purchase any spot cargo,” a downstream Korean synthetic rubber producer said.

 

“The downstream synthetic rubber market is very weak, so we will not import BD for the rest of the year, given the poor market conditions,” a downstream Chinese SBR producer said, echoing the same sentiment expressed by his Korean counterpart.

 

The export-driven economies of Asia, including China and Korea, have taken a hit from the global credit crisis and looming recession, which have eroded export demand.

 

Several derivative styrene butadiene rubber (SBR), butadiene rubber (BR), thermoplastic elastomer (TPE) and acrylonitrile-butadiene-styrene (ABS) plants in China and Korea have either shut or slashed operating rates amid the global downturn.

 

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By: Helen Yan
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