15 April 2009 08:34 [Source: ICIS news]
By Helen Yan
SINGAPORE (ICIS news)--Asia butadiene (BD) spot prices are poised to rise further on the back of tight supplies and rising demand in China, traders and producers said on Wednesday.
The offers for May cargoes went up this week by $100/tonne (€75/tonne) or 15% to $760/tonne CFR (cost and freight) northeast (NE) Asia. BD spot prices were at $620-650/tonne CFR NE Asia last week, according to global chemicals market intelligence service, ICIS pricing.
"Demand in China is strong while supply is getting tighter as many BD producers are using a lighter feedstock which yields less BD," said a source close to a major Korean olefins producer, Yeochun Naphtha Cracking Centre (YNCC).
YNCC itself has hiked May offers to $700/tonne FOB (free on board) Korea, equivalent to $760/tonne CFR basis to China, the source added.
Several BD producers including YNCC and Formosa Petrochemical Corp (FPCC) have switched from naphtha to liquefied petroleum gas (LPG), which was cheaper. YNCC will produce 500-1,000 tonnes less BD each month, while FPCC’s production is set to reduce by 1,500-3,000 tonnes each month, according to sources.
"We have also limited spot products as domestic demand from our contract customers in Korea is very good," the source added.
BD supply is expected to tighten further in the second quarter as YNCC is scheduled to shut down its 230,000 tonne/year BD unit for 20 days from 28 May for maintenance.
Some traders have hiked offers to $800-850/tonne CFR NE Asia amid talks that traders with cargoes in hand are holding back offers anticipating higher prices.
"I am holding out for $800/tonne CFR as Chinese demand is very strong and supply will tighten in May and June when YNCC shuts down," a Korean trader said.
Domestic BD prices in China rose to yuan (CNY) 5,900/tonne ($864/tonne) ex-tank this week, up CNY300-500/tonne from the previous week as demand from the downstream styrene butadiene rubber (SBR) and acrylonitrile-butadiene styrene (ABS) plants continued to strengthen.
Domestic consumption of automobiles and consumer products, which use SBR and ABS, has increased in China as customers were lured by incentives - under the government's $585bn stimulus package - to purchase cars and household appliances such as television sets, washing machines and refrigerators.
China’s auto sales hit a monthly record of 1.11 million vehicles in March, exceeding US sales for the third month in a row, as tax cuts and rebates for small car purchases pushed demand up.
Americans bought 857,735 new vehicles in March, according to Autodata Corp.
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