OUTLOOK '11: Asia BD spot prices may surge in Q1 on demand

06 January 2011 02:46  [Source: ICIS news]

By Helen Yan

BD is used in making SBR, which in turn is used to make tyresSINGAPORE (ICIS)--Asia butadiene (BD) prices may surge in the first quarter and rise above $2,300/tonne (€1,748/tonne) in March as demand is expected to outstrip supply, industry sources said.

New downstream synthetic rubber plants in South Korea and China are expected to start up just when BD supply is likely to tighten with the onset of the cracker turnaround season in February and the closure of the arbitrage window from Europe, traders said.

Spot offers for January have already jumped to $2,150/tonne CFR (cost and freight) northeast (NE) Asia, up $100/tonne from the previous month.

December BD spot prices were assessed at $2,040-2,070/tonne CFR NE Asia by the close of business on 24 December according to data from ICIS.

“The minimum spot offer for January shipments is $2,150/tonne CFR NE Asia and we expect BD spot prices to climb to $2,300-2,400/tonne CFR in March as deep-sea BD supply from Europe has dried up and demand in Asia is expected to increase just when supply tightens,” a Korean trader said.

Asia’s largest synthetic rubber maker, Korea Kumho Petrochmical Co (KKPC) is scheduled to start up a new 120,000 tonne/year butadiene rubber (BR) plant in Yeosu, South Korea, in February.

Two new styrene butadiene rubber (SBR) plants in China, Tianjin Lugang Petroleum and Rubber in Tianjin, and Fuxiang Chemical in Fujian, each with a capacity of 100,000 tonnes/year, are also expected to commence commercial production in the first quarter, industry sources said.

The synthetic rubber producers are major consumers of BD.

However, BD supply is expected to tighten from February to May, with several crackers including LG Chem, Samsung Total and Yeochun NCC Co (YNCC) shutting down for maintenance during this period.

Asian downstream synthetic rubber makers usually turn to Europe to procure BD spot cargoes if supply in Asia is limited.

However, BD spot cargoes from Europe have been diverted to the US where prices have risen significantly.

“We expect BD spot prices in the US to hit 100 cents/lb or $2,200/tonne soon which will make it more attractive for European BD suppliers to ship their cargoes to the US instead of Asia,” a Korean trader said.

“The arbitrage window from Europe to Asia has closed, which means upward pressure on BD prices in Asia,” he added.

Apart from rising demand and tighter-than-expected supply, another factor that is providing support to the anticipated upward BD price spiral in the first quarter is the soaring downstream synthetic rubber prices, suppliers said.

“The downstream synthetic rubber makers have big margins and can afford to pay higher BD prices, as the downstream BR and SBR prices have gone up significantly since early December,” a supplier said.

The derivative butadiene rubber (BR) spot prices had surged to $3,700-3,800/tonne CFR NE Asia, up $250/tonne since early December, while the other downstream non-oil grade 1502 SBR prices had increased to $3,000-3,100/tonne CFR NE Asia, up $200/tonne in the past month, according to data from ICIS.

BD - SBR Price Chart

($1 = €0.76)

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By: Helen Yan
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