FocusAsia synthetic rubber makers to cut ops on feedstock BD surge

17 March 2010 03:47  [Source: ICIS news]

By Helen Yan

SINGAPORE (ICIS news)--Major synthetic rubber producers in Asia plan to cut operating rates if the feedstock butadiene (BD) price continues to rise, accentuating the stand-off between buyers and sellers, industry sources said on Wednesday.

BD spot offers have surged above $2,000/tonne (€1,460/tonne) CFR (cost and freight) northeast (NE) Asia, up more than $250/tonne since mid-February, according to global chemicals market intelligence service, ICIS pricing.

However, buying indications hovered around $1,900/tonne CFR NE Asia.

The widening buy-sell price gap has resulted in a stalemate between end-users and sellers and prompted several major Asian synthetic rubber producers including Korea Kumho Petrochemical Co (KKPC) and Shen Hua Chemicals to implement reduction cuts.

BD is a feedstock used in the production of styrene butadiene rubber (SBR), butadiene rubber (BR), acrylonitrile-butadiene rubber (NBR), thermoplastic elastomer (TPE), styrene butadiene (SB) latex and acrylonitrile-butadiene-styrene (ABS).

These chemicals go into making a wide variety of consumer products including tyres, automobile parts, household appliances, latex gloves and carpet backing.

“We will seriously consider reducing further the operating rates of  our SBR, BR, TPE, ABS, NBR and SB latex units to 70-90% from the current 80-90% operating rates,” a company source at KKPC said.

A major BD consumer, KKPC runs a 482,000 tonne/year SBR,  a 222,000 tonne/year BR, a 50,000 tonne/year NBR, a 250,000 tonne/year ABS, a 75,000 tonne/year TPE and a 70,000 tonne/year SB Latex plant.

Shen Hua Chemicals also said it would reduce the rates of its 180,000 tonne/year SBR and 72,000 tonne/year BR plants in Nantong, China as its margins were being eroded by the escalating feedstock BD cost.

“We will cut the operating rates of our synthetic rubber plants by 10% if the BD price continues to rise,” a company source at Shen Hua Chemicals said.

“We will not import any BD and will source BD locally in the domestic Chinese market,” he added.

The sharp BD price upsurge in Asia was due to a sudden tightening in supply as some 9,000 tonnes of BD is scheduled to be shipped out of Asia in March to the US, which saw spot prices soaring to 98-101 cents/lb ($2,156-2,222/tonne) last week.

Major Korean BD producer, Yeochun NCC (YNCC), sold a 5,000 tonne cargo to Korean traders at $2,000/tonne FOB (free on board) Korea while Titan Petrochemical of Malaysia sold a 4,000 tonne BD spot cargo to a trader at $1,900-1,950/tonne FOB Malaysia. Both these parcels are slated for end-March shipment to the US.

In light of the arbitrage trades to the US, Asian BD producers have hiked April spot offers to $2,000-2,100/tonne CFR Asia and have stood their ground despite stiff resistance from the downstream tyre makers.

“Our BD spot offer for April shipment is at least $2,000/tonne, and we will not start discussions unless the figure starts with a two,” an Asian BD producer said.

However, the synthetic rubber producers have refused to budge from their positions and will continue to hold out for lower numbers as additional BD capacities are expected to come on-stream in April in China and Southeast Asia.

“We anticipate that BD prices will start to fall in April as more supply will come on-stream in China and we will wait,” a Chinese synthetic rubber producer said.

China’s Tianjin Petrochemical is expected to ramp up the operating rate of its new 200,000 tonne/year BD unit to 100% in April following some recent intermitted production issues which saw its operating rate hovering around 60%.

Zhenhai Refining and Chemical Co is also expected to start up a new 150,000 tonnes/year Chinese BD unit in Zhenhai in Zhejiang province in China end of March.

In Southeast Asia, Shell has recently announced that it will commission the start-up of its new 800,000 tonne/year cracker in Singapore. Shell’s new cracker has a 155,000 tonne/year BD extraction unit, which is expected to start up by end of April.

($1 = €0.73)

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By: Helen Yan
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