FocusAsia BD may extend falls in September; supply outstrips demand

31 August 2011 06:12  [Source: ICIS news]

By Helen Yan

SINGAPORE (ICIS)--Butadiene (BD) prices in Asia may fall further in September with more supply coming into the market while demand is still weak, given current low production in downstream synthetic rubber sector, market sources said on Wednesday.

Spot BD discussions for September shipments on Wednesday are at $3,500-3,700/tonne (€2,415-2,553/tonne) CFR (cost and freight) NE (northeast) Asia, according to traders.

In the week ending 26 August, BD spot prices were assessed at $3,650-3,700/tonne CFR  NE Asia, down by $350/tonne from end-July, according to ICIS.

Several BD spot parcels from China and the Middle East are available for September loading but demand has remained soft as several downstream synthetic rubber plants in Asia are either shut for maintenance or are running at reduced rates, traders said.

BD is a raw material for the production of synthetic rubbers, which are in turn used in the manufacture of tyres for the automobile industry.

“If Formosa [Petrochemical Corp (FPCC)] restarts its no 1 cracker soon in Taiwan, there will be more BD available in September and this will put more downward pressure on BD prices,” a trader said.

FPCC is expected to restart its 700,000 tonne/year no 1 cracker and derivative 109,000 tonne/year BD extraction unit at Mailiao soon.

The no 1 cracker has been off line since 12 May because of a string of fire incidents that hit Formosa’s Mailiao petrochemical complex.

In addition, China is also seeking customers for its surplus BD in September due to the slump in domestic demand as several downstream butadiene rubber (BR) plants in China are shut for maintenance.

These include Hunan Baling Chemical Industry Co, Beijing Yanshan Chemical Industry, Xinjiang Dushanzhi Chemical Industry and Heilongjian Daqing Chemical Industry.

Outside of China, South Korean BR producers including Korea Kumho Petrochemical and LG Chem have reduced operating rates at their BR plants by more than 30%, industry sources said.

“We are in no hurry to purchase any BD spot cargo and we can wait,” a South Korean synthetic rubber maker said.

Buyers are seeking around $3,500/tonne CFR NE Asia for September shipments, although some players have not ruled out the possibility that BD prices may fall to around $3,200/tonne CFR NE Asia, given expectations of improved supply when Formosa restarts its No 1 cracker.

Meanwhile, Asian BD prices may change course in October as supply in the US will likely tighten with the scheduled turnaround at major crackers, including those owned by Exxonmobil, Shell and Dow Chemical.

“If US demand for BD increases in October, then we can expect the Asian BD producers to ship out their product to the US and we may see a rebound in BD prices then,” a trader said.

($1 = €0.69)

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

By: Helen Yan
+65 6780 4359

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