FocusAsia BD spot seen rising in April on global supply crunch

05 April 2011 04:43  [Source: ICIS news]

By Helen Yan

SINGAPORE (ICIS)--Asia butadiene (BD) spot prices are likely to rise further in April as a global supply crunch amid Japan earthquake and Middle East unrest spurs sellers to raise offers to $3,000/tonne (€2,100/tonne), industry sources said on Tuesday.

“There is still room for the BD price to go up further above $3,000/tonne if supply remains tight and demand from the downstream synthetic rubber makers remains strong,” a Korean trader said.

BD spot prices were at $2,750-2,800/tonne CFR (cost and freight) NE (northeast) Asia in the week ended 1 April, according to ICIS.

BD spot prices have increased by $700/tonne since early January this year as strong demand from the downstream synthetic rubber market had bolstered prices.

In early January 2011, BD spot prices hovered around $2,050/tonne CFR NE Asia, ICIS data showed. (please see table below)

Strong demand from the downstream synthetic rubber makers and a global BD supply crunch in the wake of the March 11 earthquake in Japan and ongoing military conflict in Libya are expected to further bolster the BD price upswing, traders said.

April shipments of BD exports from Japan had to be delayed or cancelled in the aftermath of the massive 9.0 magnitude earthquake and ensuing tsunami which caused extensive damage to infrastructure and disrupted supply.

Further adding upward pressure on the BD price in Asia was a spate of production issues in Europe and the US which has closed the arbitrage window to Asia.

Technical issues, ongoing and upcoming cracker turnarounds in Europe have significantly reduced BD supply and lifted BD spot prices in Europe to $3,000/tonne FOB (free on board) ARA (Amsterdam, Rotterdam and Antwerp) in the week ended 1 April.

With freight costs from Europe to Asia hovering around $300/tonne this would mean that Asian BD consumers would have to pay at least $3,300/tonne CFR NE Asia.

BD production in the US has also been constrained by limited crude C4 due to the military conflict in Libya, a major crude C4 exporter. Crude C4 is the raw material for BD.

April BD spot prices in the US jumped up by 9 cents/lb to 135-145 cents/lb in the week ended 1 April, ICIS data showed.

“The arbitrage window to Asia has closed which means that BD prices in Asia are likely to face more upward pressure,” a trader said.

($1 = €0.70)

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For more information on BD, visit ICIS chemical intelligence
Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By: Helen Yan
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