FocusAsia BD may rebound in September/October as supply tightens

16 August 2011 07:06  [Source: ICIS news]

BD is a raw material for synthetic rubbers, which are used in the production of tyres for automobileBy Helen Yan

SINGAPORE (ICIS)--Spot prices of butadiene (BD) in Asia may rebound in September or October as supply of the material will tighten, with a number of crackers in Asia and the US due to undergo maintenance during the period, industry sources said on Tuesday.

Some producers said they expect BD prices to rise above $4,000/tonne (€2,800/tonne) towards the fourth quarter, after shedding $450/tonne over the past month.

BD prices were last assessed at $3,800-3,850/tonne CFR (cost and freight) NE (northeast) Asia in the week ending on 12 August, ICIS data showed.

“We expect BD supply to tighten in the coming months, and if demand in China and India picks up at the same time, we can see BD going up to around $4,000/tonne CFR in Asia in September or October,” said a downstream synthetic rubber producer.

In Asia, Shell’s 800,000 tonne/year cracker on Bukom Island, Singapore, and Formosa Petrochemical Corp’s (FPC) 1.2m tonne/year No 3 cracker in Mailiao, Taiwan, are due for turnarounds in mid-August.

Shell's Bukom cracker has a 155,000 tonne/year BD extraction unit.

FPCC’s cracker, which has a 176,000 tonne/year BD extraction unit, will be down for about 40-45 days. Meanwhile, its 700,000 tonne/year No 1 cracker, with a 109,000 tonne/year BD extraction unit, has remained shut since 12 May following a fire at the Mailiao petrochemical complex.

“Whether the BD price will fall further or rebound depends to some extent on Formosa - whether its No 1 cracker will restart soon or it will continue to stay off line,” said a Taiwanese buyer.

Meanwhile, a pick-up in demand from the US will likely exert strong upwards pressure on Asian BD prices.

“We anticipate US demand for Asian BD imports to pick up in September and October, given that [several US crackers] are shut during this period,” an Asian BD supplier said.

ExxonMobil will shut its 1m tonne/year Baton Rouge cracker in Louisiana, which has a 175,000 tonne/year BD extraction unit, for 45 days from 1 September.

Shell will take its 835,000 tonne/year cracker at Deer Park, Texas, off line for 45 days from 1 October. The cracker has a 145,000 tonne/year BD unit.

Formosa’s Point Comfort cracker 2 in Texas will be down in September for 35-40 days, while Dow Chemical’s cracker at St Charles, Louisiana, will be down for 30 days in October.

“The Korean BD producers will likely increase their exports to the US during this period, which means that BD supply in Asia will be curtailed and that buyers may have to pay higher prices,” a trader said.

For the rest of August, however, BD prices in Asia may continue to fall amid current weak demand and bearish sentiment.

Downstream butadiene rubber (BR) plants in Asia are either cutting production or shutting down their plants for maintenance to curb their BD demand.

BR is a major raw material used in the production of tyres for the automotive industry

Yanshan Petrochemical, Gaoqiao Petrochemical, Dushanzhi Petrochemical, LG Chem, TSRC Corp and TSRC-UBE are some of the synthetic rubber plants in China, South Korea and Taiwan that are scheduled to conduct turnarounds at their plants in August and September.

“Synthetic rubber makers are very cautious and are not buying BD at the moment as several BR plants have either cut operating rates or shut down and are adopting a wait-and see stance,” a Chinese synthetic rubber producer said.

Concerns over a possible return to global economic recession - with the US credit rating downgraded by Standard & Poor’s and the eurozone still deep in debt crisis - have affected the global equities and crude markets in recent weeks.

Export-oriented economies such as China and countries in southeast Asia are major production centres for global tyre makers such as Goodyear, Bridgestone, Michelin and Continental. Their major export markets include Europe and the US.

($1 = €0.70)

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By: Helen Yan
+65 6780 4359

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