Asia Q2 BR contract offers up $400/tonne on feedstock BD

04 March 2010 03:50  [Source: ICIS news]

SINGAPORE (ICIS news)--Asian butadiene rubber (BR) producers have initiated a hefty $400/tonne (€292/tonne) price hike for second quarter (Q2) contracts on an anticipated increase in the feedstock butadiene (BD), producers said.

Second quarter contract offers were hiked to $2,600-2,700/tonne CFR (cost and freight) Asia compared with first quarter contracts which were settled at $2,200-2,300/tonne CFR Asia.

Feedstock BD values rose $50/tonne to $1,800-1,850/tonne CFR northeast (NE) Asia last week, according to global chemicals market intelligence service, ICIS pricing.

However, the feedstock BD price was expected to rise further as Asian BD producers planned to export to the US, where prices have soared to 90 cents/lb ($1,980/tonne).

Major Korean BD producers including Yeochun Naphtha Cracking Centre (YNCC) and Honam Petrochemical are looking at capitalising the arbitrage opportunities to the US and plan to export 5,000 tonnes of BD to the US.

“BD supply in Asia will tighten and prices are likely to rise to $2,000/tonne if Asian BD producers export BD to the US,” a Korean BR producer said.

“This means that we have no choice but to increase the Q2 BR contract offers to $2,700/tonne CFR Asia or our margins will be eroded,” he added.

However, resistance from the downstream tyre producers is strong to the huge Q2 contract price increase.

“A $400/tonne price hike is not workable. We are looking at a moderate hike of $100-200/tonne to $2,400/tonne CFR Asia,” a major tyre producer said.

Several major downstream tyre producers have also earlier built up stocks to cover April requirements and are not under pressure to accede to the massive price hike.

“We can wait and are in no hurry to settle the Q2 contracts,” another major tyre producer said.

“Historical records show that the feedstock BD price can go up sharply or drop sharply. It can go either way, so there is no certainty that the feedstock BD price will go up to $2,000/tonne,” he added.

($1 = €0.73)

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By: Helen Yan
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