FocusAsia SBR makers resist soaring BD via heavy output cuts

03 July 2009 05:44  [Source: ICIS news]

By Helen Yan

SINGAPORE (ICIS news)--Asian synthetic rubber producers are up in arms against further spikes in prices of feedstock butadiene (BD) that bite heavily into their profitability, industry sources said on Friday.

Producers in Korea, Taiwan and China have started implementing significant cuts in output - with some plants being taken off line while other plants would be run at significantly reduced capacity - as BD at above $1,000/tonne (€710/tonne) was deemed unacceptable, they said.

BD spot offers have surged $100/tonne to $1,050/tonne FOB (free on board) Korea, which was equivalent to more than $1,100/tonne CFR (cost and freight) basis in northeast (NE) Asia, with freight costs hovering around $60/tonne in intra-regional trades.

Spot deals were concluded at $900-940/tonne CFR NE Asia last week, according to global chemicals markets intelligence service, ICIS pricing.

“It is impossible to accept BD at $1,000/tonne as it will wipe out our margins,” said a company official at Korea Kumho Petrochemical Co (KKPC).

“We have decided to stop production at our new 110,000 tonne/year SBR plant and will shut down in July and August,” he said.

KKPC is the largest synthetic rubber producer in Asia and has a styrene butadiene rubber (SBR) capacity of 480,000 tonne/year and butadiene rubber (BR) capacity of 222,000 tonne/year.  It also runs a 50,000 tonne/year nitrile rubber (NBR) plant.

Other Taiwanese and Chinese synthetic rubber producers including TSRC Corp of Taiwan and Shen Hua Chemical Industrial of China also strongly oppose the sharp gains in BD prices.

BD spot prices have increased by $200-300/tonne since early June, driven up by higher naphtha costs and supply crunch.

Naphtha soared to more than $600/tonne CFR Japan, while delays in the start-up of a new 120,000 tonne/year BD plant in Fujian, China and dwindling deep-sea supply from Europe have tightened overall supply in the region.

“We intend to reduce the operating rate of our SBR plant by 20-30% from second-half July to the end of September,” said a company source at Taiwanese SBR producer TSRC Corp.

“We cannot accept BD at this kind of high price level of $1,000/tonne as we will have no margin,” he said.

TSRC operates a 100,000 tonne/year styrene butadiene rubber (SBR) plant, a 54,000 tonne/year butadiene rubber (BR) unit and a 54,000 tonne/year thermoplastic elastomer (TPE) line in Kaohsiung, Taiwan, all of which require the feedstock BD to run.

“We will also shut down out BR plant in September for maintenance,” the source at TSRC added.

Another synthetic rubber producer Shen Hua Chemical Industrial will consider shutting down its 180,000 tonne/year SBR plant in Nantong, China in August for maintenance, siad a company source.

“BD at $1,000/tonne is unacceptable as we will lose money,” he said.

“The domestic Chinese SBR market is weak and we cannot imagine how any SBR producer can accept BD at $1,000/tonne and still run a profitable business,” he added.

($1 = €0.71)

For more on butadiene visit ICIS chemical intelligence
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By: Helen Yan
+65 6780 4359

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