FocusDeep-sea BD cargoes flock to Asia as arbitrage window opens

16 December 2009 04:57  [Source: ICIS news]

By Helen Yan

SINGAPORE (ICIS news)--Asian butadiene (BD) prices are likely to plateau out in January as the arbitrage window opens up a flood of deep-sea cargoes from Europe and the US Gulf, traders said on Wednesday.

“The BD market in Europe and the US is soft during the year-end holiday season and BD producers in these regions are de-stocking, which have opened up the arbitrage window to Asia,” a trader said.

“About 30,000 tonnes of deep-sea cargoes from Europe and the US are expected to arrive in Asia in second-half January and there is no way the BD price upsurge is sustainable in Asia,” he added.

Asian BD prices have surged by about $300/tonne (€207/tonne) since mid-November with sellers targeting at least $1,700/tonne CFR (cost and freight) northeast (NE) Asia for January cargoes following previous trades concluded above $1,600/tonne CFR NE Asia, traders said.

However, it is an opposite case in Europe and the US as weak demand during the year-end holiday lull saw BD prices falling in these regions.

US December BD contract was settled 3 cents/lb down at 65 cents/lb while the European December BD contract was concluded down €30/tonne from November at €930/tonne free delivered.

Meanwhile, resistance to the BD price upsurge has stiffened as Asian styrene butadiene rubber (SBR) producers have expressed their intention to reduce operating rates if the BD price was to continue to rise.

“Our margins will be wiped out if BD is higher than $1,500/tonne as the SBR prices are only around $1,800-1,850/tonne,” a major styrene butadiene rubber (SBR) producer said.

A spread of about $400/tonne is required for SBR producers to post any margins.

“We will wait for prices to fall as BD supply is expected to ease when China’s Tianjin Petrochemical starts commercial production of its new BD plant in February,” another SBR producer said.

Tianjin Petrochemical has started test trial at its new 150,000 tonne/year BD plant and is expected to commence commercial production in February.

($1 = €0.69)

For more on butadiene visit ICIS chemical intelligence
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Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By: Helen Yan
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