07 October 2010 07:48 [Source: ICIS news]
SINGAPORE (ICIS)--Asia butadiene (BD) prices are expected to strengthen further and could even rise to $1,900-2,000/tonne (€1,368-1,440/tonne) on the back of rising upstream crude and naphtha prices and increased China demand, industry players said on Thursday.
“We anticipate it may not be unlikely for the BD price to rise to $1,900-2,000/tonne by the end of this year,” a trader said as crude futures increased to $85/bbl while naphtha prices hit $750/tonne CFR Japan.
In the week ending 1 October, spot prices for BD had risen $60-70/tonne week-on-week to $1,740-1,760/tonne CFR (cost and freight) NE (northeast) Asia, according to ICIS.
A major Korean BD producer had reportedly increased its spot offers to $1,800/tonne FOB (free on board) ?xml:namespace>
“The sentiment is bullish…The rising upstream costs are driving up petrochemical prices including the downstream synthetic rubber prices which have increased sharply and can easily support BD at $1,800/tonne,” the producer said.
Prices of downstream butadiene rubber (BR) rose to $2,750-2,800/tonne CFR NE Asia in the week ending 1 October, up $100/tonne since early September, according to data from ICIS.
A spread of about $600-700/tonne is sufficient for BR makers to post margins
With the spread between BD and BR widening to $1,000/tonne, industry players believed there was room for BD prices to rise further.
Synthetic rubber prices have been marching upwards since early September, tracking the soaring natural rubber prices, sources said.
The TSR 20 natural rubber grade hit $3,600/tonne this week at the Singapore Commodity Exchange (SICOM), up more than $300/tonne since early September.
Natural rubber and synthetic rubber prices tend to move in tandem as they are used interchangeably in the production of tyres for the auto industry.
“It is a bull run for the synthetic rubber market which means also a bull run for butadiene,” a trader said.
Meanwhile, dwindling Chinese BD exports as well as the substantial price increase in the Chinese domestic market prior to the National Day holidays from 1-7 October, had further fuelled the BD price uptrend in Asia, sources said.
“We have received bids for BD at $1,800/tonne CFR NE Asia from Chinese buyers against offers at $1,820/tonne CFR NE Asia for November shipments,” a Korean BD trader said.
Chinese domestic BD prices had surged by yuan (CNY) 500/tonne ($75/tonne) to CNY 15,000/tonne
The upcoming start-up of Hanghzou Zhechen Rubber Co’s new 50,000 tonne/year styrene butadiene rubber (SBR) plant in China’s Zhejing province later this month, was expected to further curtail Chinese BD supply, sources said.
($1 = €0.72 / $1 = CNY6.69)Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections
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