FocusAsia BD may fall further on slump in ethylene and SBR values

25 May 2010 04:04  [Source: ICIS news]

By Helen Yan

SINGAPORE (ICIS news)--Asia butadiene (BD) prices are under pressure to decline further as downstream synthetic rubber makers press for lower numbers following the slump in the upstream ethylene and downstream styrene butadiene rubber prices, market players said.

BD spot prices dropped $30-50/tonne (€24-40/tonne) last week to around $2,150/tonne CFR (cost and freight) northeast (NE) Asia following substantial losses in the upstream ethylene and downstream styrene butadiene rubber (SBR) values.

Ethylene plunged $170/tonne to around $1,100/tonne CFR NE Asia last week while non-oil grade 1502 SBR prices tumbled $150/tonne to around $2,200/tonne CFR Asia.

Several major synthetic rubber makers in China, Taiwan and Korea have said they would either cut or shut down their plants as their margins had been severely eroded, given the slump in synthetic rubber prices on worries over the impact of the Euro-zone debt crisis on the export-dependent economies of Asia.

Europe is China’s largest export market.

Most major international tyre manufacturers have production plants in China which make tyres for export to Europe.

SBR is a major feedstock used in the production of tyres for the auto industry.

Major synthetic rubber producer, Korea Kumho Petrochemical Co (KKPC), will shut down its acrylonitrile-butadiene-rubber (NBR) plant for 15 days in early June while the operating rate of its SBR plant will be cut further in June.

“The synthetic rubber market is very weak and we will shut down our NBR plant in Ulsan for 15 days while the operating rate of the SBR plant will be cut further to 75%,” a company source said.

In China, domestic non-oil grade 1502 SBR prices have plunged by yuan (CNY) 3,000/tonne ($439/tonne) since April to around CNY 15,000/tonne ex-warehouse as suppliers and traders liquidated stocks on fears of further price falls.

“The synthetic rubber market is very weak in China and we cannot afford to pay higher than $2,000/tonne CFR basis for BD,” a Chinese SBR producer said.

However, a sharp price drop in BD has been ruled out, given that supply is expected to still remain balanced following the delayed start-up of a new cracker and BD extraction unit in China, market players said.

Sinopec subsidiary Zhenhai Refining and Chemical Co (ZRCC) will delay the start-up of its new 1 m tonne/year cracker in Ningbo, China, to June, after a failed attempt to start up the cracker on 20 May.

Its new 165,000 tonne/year butadiene (BD) extraction unit was only expected to start up in late June or early July instead of mid-May as originally scheduled, market sources said.

In light of this latest development, BD producers and suppliers are unwilling to offer significant discounts, citing limited availability.

“BD supply is still tight and we are keeping our offers unchanged at $2,200/tonne CFR NE Asia,” a Korean trader said.

($1 = €0.81 / $1 = CNY6.83)

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By: Helen Yan
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