FocusAsia BR downtrend to continue on plunging butadiene values

04 November 2011 04:43  [Source: ICIS news]

By Helen Yan

SINGAPORE (ASIA)--Butadiene rubber (BR) prices in Asia are likely to continue sliding down because of plunging values of feedstock butadiene (BD), industry sources said on Friday.

In the week ended 3 November, spot BR prices were assessed at $3,100-3,200/tonne (€2,232-2,304/tonne) CFR (cost and freight) southeast (SE) Asia, down by about $800/tonne from early October, according to ICIS data.

“The feedstock BD prices have plunged to around $1,700/tonne CFR NE Asia and are expected to fall further, so we expect BR prices to follow suit and drop below $2,700/tonne CFR NE Asia,” a tyre maker said.

On 28 October, average spot BD prices were assessed at $1,950/tonne CFR NE Asia, down by $800/tonne or about 30% from end-September, according to ICIS.

Traders or sellers with BR stocks-in-hand are under mounting pressure to clear their stocks before the end of the year, prompting some suppliers to cut their offers for fresh November shipments to $2,900-3,000/tonne CFR SE Asia, industry sources said.

Demand for BR has slumped as downstream tyre makers in southeast Asia, particularly in Thailand, have shut down their operations. In Thailand, massive floods inundated some of the country’s industrial sites, causing extensive damage and disruption to its supply chain.

International automotive and tyre manufacturers, including Honda of Japan and Goodyear of the US, have shut down their factories in Thailand. They have announced that Thailand’s floods will hit their fourth-quarter financial performance.

Honda Automobile has said that the company does not have a clear view on when vehicle production would resume at its auto assembly plant at Rojana Industrial Park in the Ayutthaya province of Thailand.

Thailand is Honda’s second-largest Asian manufacturing base.

Major US tyre maker, Goodyear, has also closed its Bangkok factory that makes consumer and aviation tyres on 20 October, with no definite timeline when production can resume.

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

Compounding the problems of tyre makers in southeast Asia are the ongoing debt crisis in Europe and the sagging US economy, since these translate to lower exports. Europe and the US are major markets for export-oriented economies in southeast Asia.

“There is so much uncertainty over the eurozone debt crisis and fears of a global recession, so tyre makers are not going to run at full capacities and build up BR stocks in the fourth quarter,” a southeast Asian tyre maker said.

($1 = €0.72)

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

By: Helen Yan
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