Asia BD may fall further as demand falters

25 November 2008 04:00  [Source: ICIS news]

By Helen Yan

 

SINGAPORE (ICIS news)--Asia butadiene (BD) may still have room to fall despite plummeting by more than 75% since its July peak if demand remained dormant and crude prices were to drop to $40/bbl, traders said on Tuesday.

 

BD spot prices have plunged to four-year lows of $700-750/tonne CFR (cost and freight)  NE (northeast) Asia, down a hefty $2,600/tonne from July's $3,300-3,400/tonne CFR NE Asia, as demand from the derivative synthetic rubber and plastics manufacturers has slumped amid the global downturn.

 

“It is highly possible for BD to drop further and we may see BD at $500/tonne within this year if crude falls to $40/bbl and naphtha slips to $200/tonne,” a trader said.

 

Crude values have plunged by more than 60% to $54.50/bbl on Monday from the peak of $147/bbl seen in July, dragging down prices of most petrochemical products.

 

Falling energy and upstream costs on top of declining car sales and amid a deepening global recession have bitten into demand for BD, a major raw material used in the manufacture of synthetic rubber and plastics.

 

Demand has deteriorated as the derivative styrene butadiene rubber (SBR), butadiene rubber (BR) and acrylonitrile-butadiene-styrene (ABS) makers have shut or slashed operating rates amid the slump in the global car market.

 

SBR, BR and ABS are used in the production of tyres and automobile parts and components.

 

Major Korean synthetic rubber producer Korea Kumho Petrochemical Co (KKPC) has shut down its 250,000 tonne/year ABS plant and will shut down its 222,000 tonne/year BR unit in December. It also said it will cut the operating rate of its 371,000 tonne/year SBR plant by 50% in December.

 

Several SBR and ABS makers in Asia, including Shen Hua Chemicals, JSR Corp, Toray Industries and Chi Mei, have cut operating rates.

 

Sales of automobiles have dipped in major economies such as the US, Europe and Japan. Emerging economies such as China and India have not been spared as automobile sales slowed this year in once booming markets.

 

China’s automobile sales were only expected to grow by 9.7% this year, less than 50% from 2007, while India’s growth was forecast at 5.1% this year, considerably less than the growth rates of 16% and 21% achieved in 2007 and 2006 respectively.

 

“However, we believe the BD price is nearing the bottom and we expect demand and prices to recover next year in March, after the Lunar New Year,” a Chinese SBR producer said.

 

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By: Helen Yan
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