FocusAsia BD prices may fall further in August as demand slackens

28 July 2011 04:55  [Source: ICIS news]

By Helen Yan

SINGAPORE (ICIS)--Butadiene (BD) prices in Asia may fall further in August as demand slackens amid a spate of shutdowns and production cutbacks at downstream synthetic rubber plants, industry sources said.

Several downstream styrene butadiene rubber (SBR) and butadiene rubber (BR) producers plan to either reduce the operating rates of their plants or shut them down for maintenance, given the erosion in their margins, market sources said.

Asia BD spot prices fell by $150/tonne (€105/tonne) to $4,100-4,150/tonne CFR (cost & freight) NE (northeast) Asia for the week ended 22 July after hitting an all-time record high at $4,250-4,300/tonne CFR NE Asia on 15 July, ICIS data showed.

Several SBR and BR plants in China, Taiwan and South Korea have either shut or plan to shut their plants for maintenance. These producers include Shandong Yuhuang Petrochemical, Hangzhou Zhechen Rubber, Shen Hua Chemicals, Taiwan Synthetic Rubber Corp (TSRC), and Korea Kumho Petrochemical Co (KKPC).

This has not only depressed demand for BD, but has also inundated the market with surplus BD stocks as Chinese BD suppliers target the export market, given the weak domestic conditions.

More than 5,000 tonnes of BD are available from China for loading in August, according to market sources.

“There is ample BD supply from China and we are now negotiating with the Chinese suppliers for August shipments,” a major Korean synthetic rubber producer said.

Traders in possession of stocks are also trying to liquidate them as fast as they can on fears of further price declines, industry sources said.

“We have received several offers from traders this week, which means that supply is ample,” a downstream Taiwanese SBR producer said.

Buying indications have dropped to $4,000/tonne CFR NE Asia against offers that were priced at least $100-200/tonne higher.

However, end-users’ hopes of a sustained BD price downtrend may be dashed after a 2,000 tonne cargo was sold to a trader in a sales tender at $4,135/tonne FOB (free on board) in Pasir Gudang, Malaysia this week, according to a regional BD producer.

Meanwhile, freight costs are hovering at around $60/tonne within the region and $120/tonne in intra-regional trades, which means on a CFR-basis, the above sales tender cargo would be priced at around $4,200/tonne CFR in southeast Asia and at around $4,250/tonne CFR in northeast Asia, according to traders.

“The suppliers are trying to prop up their prices as they fear that prices may tumble, given that buyers are not willing to pay above $4,000/tonne on a CFR-basis,” a major end-user said.

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

By: Helen Yan
+65 6780 4359

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