FocusAsia BD prices to surge on strong demand, tightened supply

12 April 2011 06:22  [Source: ICIS news]

SINGAPORE (ICIS)--Asia’s butadiene (BD) spot prices look set to surge further on the back of strong demand from the US and a global supply crunch stemming from several unexpected cracker shutdowns, industry sources said on Tuesday.

BD spot prices were at $2,850-2,900/tonne (€1,967-2,001/tonne) CFR (cost & freight) northeast (NE) Asia in the week ended 8 April, up by around $800/tonne since January 2011, ICIS data showed.

Sellers said the tight global supply will be exacerbated as Shell has delayed the restart at its 800,000 mixed-feed cracker in Pulau Bukom, Singapore, to May.

The major producer was initially expected to restart its cracker in late March after shutting it down on 18 March because of operational issues. Shell has a BD capacity of 155,000 tonnes/year.

Meanwhile, Iran’s Jam Petrochemical has declared force majeure on ethylene, butadiene (BD), polyethylene (PE) and propylene after shutting down its 1.32m tonne/year ethylene cracker in Asaluyeh on 24 March.

The producer, which has a BD capacity of 115,000 tonnes/year, is expected to restart its cracker in mid-April.

Both Shell and Jam Petrochemical sell their BD to customers in Asia.

In light of the tighter-than-expected supply, sellers in Asia have raised their BD spot offers for May to $3,300/tonne FOB (free on board) Korea, a price level which Korean producers say they can achieve if they export to the US.

BD spot prices in the US have surged to 160-175 cts/lb ($3,520-3,850/tonne) CIF (cost, insurance & freight) US Gulf, up by 25-30 cts/lb in the week ended 8 April, according to ICIS data.

“We are now in discussions for 4,000-5,000 tonnes of May-loading BD to the US at $3,300/tonne FOB,” a Korean producer said.

Freight costs from Asia to the US are hovering at around $300-350/tonne, depending on the cargo size.

Another Korean producer said it is also mulling the possibility of exporting another 4,000-5,000 tonnes of BD to the US in May, depending on its availability.

If the Korean producers are successful in tapping the arbitrage window to the US, a total of 9,000-10,000 tonnes of BD will be shipped out of Asia in May, traders said.

“The US market is way too good this time and Asian buyers will have no choice but to pay more than $3,000/tonne if they wish to secure any cargo,” a Korean trader said.

Strong demand from the downstream synthetic rubber sector in the US as well as a spate of cracker outages in Europe and limited crude butylenes (C4) availability has severely crimped BD supply and pushed prices to above $3,000/tonne in those regions and Asia, traders said.

In addition, the ongoing conflict in Libya has limited crude C4 production as the country is a major crude C4 exporter. Crude C4 is the raw material for BD production.

“We are not sure what will be the ceiling price, but we know there is still room for BD spot prices to rise further as the current global supply crunch has seen prices rising to above $3,000/tonne in all three regions,” a producer said.

“We have not yet seen the sky and that is why it is so scary,” another trader said, referring to the ceiling price of BD.

“It is a big headache for us now,” said a major BD spot buyer.

($1 = €0.69)

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By: Helen Yan
+65 6780 4359

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