Asia BDO prices fall by $300-400/tonne on weak PU demand

25 October 2011 06:00  [Source: ICIS news]

The prices of BDO in Asia have fallen by $300-400/tonne on weak demand from the PU sector.By Quintella Koh

SINGAPORE (ICIS)--Asian butanediol (BDO) prices on a bulk basis have declined by $300-400/tonne (€216-288/tonne) this week because of weak demand from the polyurethane (PU) segment, several market sources said on Tuesday.

A European producer said it is willing to lower its offers of bulk BDO to $3,000/tonne CFR (cost & freight) China. On 18 October, bulk BDO was assessed at $3,300-3,400/tonne CFR CMP (China Main Port), according to data from ICIS.

“The buying sentiment is practically non-existent from the PU sector,” the producer said, adding that this is an unusual situation as PU demand is usually strong at the start of the fourth quarter, when PU producers stock up on BDO for the manufacture of shoe soles.

The production of shoes typically reaches it peak during this period as manufacturers increase their production for the Christmas and Lunar New Year holiday seasons.

Some Chinese shoe manufacturers, most of which are located at Wenzhou in Zhejiang province, were heard to have closed their factories permanently because of unpaid debts to creditors, the European producer and Chinese traders said.

The crisis involves small- and medium-sized enterprises (SMEs) that are struggling to survive the liquidity crunch, market sources said.

The credit crunch is result of the government’s attempt to curb inflation by tightening its monetary policy, China’s state-owned news agency Xinhua said in its publication on 11 October.

In addition, the Wenzhou manufacturers’ reliance on high-interest informal lending and a lack of supervision in the market contributed to the crisis, according to media reports.

Some companies were heard to have taken on loans with interest rates at as high as 70%, according to market sources.

A spokesman for the Wenzhou government said on 11 October around 25 banks in the city pledged to increase their lending services to SMEs to help them through the crisis, Xinhua said.

“Despite all these public measures announced by the government to help Wenzhou’s SMEs, I still do not see the situation improving, the European producer said.

“My customers are still not buying and several are not contactable,” the producer added. Other northeast Asian BDO producers said they were also experiencing the same.

“The situation appears dire as we have not been able to sell any spot cargoes for the last two weeks,” a northeast Asian producer said.

A Chinese buyer said the BDO prices are likely to decline further in the coming weeks as supply increases with the restart at several regional plants.

Taiwan’s Nan Ya Plastics has ramped up the operations at its 60,000 tonne/year No 2 BDO plant to 100% of capacity last week, a company source said.

BASF PETRONAS Chemicals is planning to restart its 100,000 tonne/year BDO plant at Gebang in Kuantan, Malaysia on 5 November.

($1 = €0.72)

For more on butanediol, visit ICIS chemical intelligence
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For more pricing intelligence, visit ICIS pricing

By: Quintella Koh
+65 6780 4372

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