FocusAsia rubber makers to cut output, shut plants on soaring BD

29 June 2011 06:37  [Source: ICIS news]

Synthetic rubbers like BR are used in the manufacture of tyres for automobiles.By Helen Yan

SINGAPORE (ICIS)--Synthetic rubber producers in Asia are mulling cutting output or shutting plants for maintenance in July and August, as costs of feedstock butadiene (BD) continued to spike, wiping out margins, industry sources said on Wednesday.

Losses will likely be incurred with BD prices hitting an all-time high of $4,000/tonne (€2,800/tonne) CFR (cost and freight) Asia on 24 June. BD prices have shot up by $1,200/tonne from 1 April, according to ICIS data. (please see graph below)

Korea Kumho Petrochemical Co (KKPC), Asia’s largest synthetic rubber producer, plans to halve production at its 410,000 tonne/year butadiene rubber (BR) plant next month, said a company source.

“Our BR margins are now negative and we have no choice but to cut our BR production output by 50% in July, and may shut down our BR plant in August if the BD price continues to rise,” the source said.

Synthetic rubbers like BR are used in the manufacture of tyres for automobiles.

Shen Hua Chemical in China and TSRC Corp in Taiwan, meanwhile, will opt to conduct maintenance at their plants within the next two months.

Shen Hua Chemical has a 72,000 tonne/year BR plant at Nantong city in Jiangsu province, which will be taken off line in July for maintenance, while its 200,000 tonne/year styrene butadiene rubber (SBR) plant will be shut in August.

“With BD at $4,000/tonne, we cannot cover the raw material costs for BR and if the BD price continues to rise, our margins for our SBR plant will also be wiped out,” said a company source.

TSRC, which is also feeling the strain from soaring BD costs, intends to shut its 60,000 tonne/year BR plant in August for a month of maintenance, said a company source.

“Feedstock BD costs have jumped up so much recently and we have no choice but to shut down our BR plant or we will lose money,” a company source at TSRC said.

Tight supply arising from unplanned cracker outages in Taiwan and Singapore, as well as strong US demand, has been driving up BD prices.

Korean BD suppliers have been shipping out several thousand tonnes to the US in recent months, crimping supply in Asia at a time when downstream BR and SBR producers are running their plants at full rates.

US is saddled with short BD supply, with less of the olefin being produced when ethane gas is used as feedstock for crackers, instead of naphtha. The feedstock switch was made because the US has abundant gas supply.

In Asia, meanwhile, plant outages at major producers are exacerbating the tight supply.

Formosa Petrochemical Corp’s (FPCC) 109,000 tonne/year BD extraction unit, along with an upstream 700,000 tonne/year No 1 cracker, has been shut since 12 May, when a fire broke out at the company’s petrochemical complex in Mailiao.

Safety checks are currently ongoing at the plants in Mailiao.

Meanwhile, the company also plans to bring forward a planned turnaround of its 1.2m tonne/year No 3 cracker, which has a 176,000 tonne/year BD extraction unit, from September to mid-August. It will be a 40- to 45-day maintenance.

In Singapore, Shell’s 800,000 tonne/year mixed-feed cracker in Pulau Bukom, is expected to shut in August for repairs that will last a month, according to olefins traders. The cracker has a 155,000 tonnes/year BD extraction unit. 

($1 = €0.70)

Read John Richardson and Malini Hariharan's blog - Asian Chemical Connections

By: Helen Yan
+65 6780 4359

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