FocusAsia BD may be near bottom as downstream SBR rebounds

12 August 2010 05:08  [Source: ICIS news]

By Helen Yan

BD is used in the production of synthetic rubber. BD prices appear to be bottoming out.SINGAPORE (ICIS)--Asia butadiene (BD) prices may be bottoming out as the downstream styrene butadiene rubber (SBR) market has started to rebound after a three-month slump, industry sources said.

SBR non-oil grade 1502 spot prices for August shipments rose to $2,000-2,050/tonne (€1,520-1,558/tonne) CIF (cost and freight) China this week, up $100/tonne from July transactions.

“The revival in the SBR market may stem the feedstock BD price fall,” a SBR producer said.

Spot BD prices fell by $100/tonne to $1,600-1,620/tonne CFR (cost and freight) northeast (NE) Asia in the week ending 6 August, according to data from ICIS. (please see graph below for more details)

“The BD price has most likely bottomed out and will stabilise and start to firm to around $1,650/tonne as the SBR market is picking up,” a Chinese SBR producer said.

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

Asia BD prices hit $2,220/tonne CFR NE Asia in early May, but have since then been on a downward trajectory as surplus BD stocks from China and falling demand depressed prices.

Asia BD prices have been trending down since early May, coinciding with the slump in the downstream SBR market.

Since late April when non-oil grade 1502 prices hit $2,300/tonne CIF China, SBR prices have since been on a downward slide, slumping to $1,900-1,950/tonne CIF China in July.

Demand for SBR has waned as tyre producers cut back on quarterly contract volumes and opted instead for smaller spot parcels amid concerns over the fiscal health of Europe and a faltering US economic recovery.

SBR is used in the production of tyres for the automotive industry.

However, the recent rebound in the Chinese domestic SBR market, which had seen SBR non-oil grade 1502 prices surge by yuan (CNY) 2,000/tonne ($295/tonne) since late July to CNY 17,000/tonne ex-warehouse (EXWH) this week, had bolstered the Asian SBR price.

“But everything is still uncertain, and the BD market still seems long. The BD price may still have room to fall further to around or below $1,500/tonne CFR before it bottoms out,” a trader said.

However, any further BD price fall will, ironically, not find support from the SBR producers.

"It will be difficult to sustain the SBR price uptrend if the BD price was to fall further. Butadiene at around $1,650-1,700/tonne CFR basis will be workable for both SBR and BD producers," a northeast Asian SBR producer said.

($1 = €0.76 / $1 = CNY6.78)

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Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By: Helen Yan
+65 6780 4359

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