FocusAsia BD may stem falls on tightening supply; crackers cut runs

16 November 2011 04:52  [Source: ICIS news]

By Helen Yan

SINGAPORE (ICIS)--Butadiene (BD) spot prices in Asia may bottom out soon and stage a rebound in December because of tightening supply, as regional crackers cut production, industry sources said on Wednesday.

BD values have tumbled by more than 60%, shedding $2,700/tonne (€1,998/tonne), from July to $1,550-1,600/tonne CFR (cost and freight) northeast (NE) Asia in the week ending 11 November, according to ICIS.

“It looks like BD spot prices are now bottoming out at around $1,550/tonne CFR NE Asia, but we do not expect a sharp rebound as demand still remains sluggish,” a trader said.

Major BD producers in the region, including South Korea’s Yeochun NCC (YNCC) and Taiwan’s Formosa Petrochemical Corp (FPCC), have reduced the operating rates at their crackers to about 80% of capacities.

In South Korea, YNCC plans to run its 240,000 tonne/year BD plant at reduced rates of 70-80% for 10 days from 20 November. The plant is currently running at full capacity.

In Taiwan, Formosa is maintaining the operating rates at its three crackers in Mailiao at 80% of capacity.

The company operates a 700,000 tonne/year No 1 cracker, a 1.03m tonne/year No 2 unit and a 1.2m tonne/year unit at the site.

Strong flows of deep-sea BD cargoes - estimated at more than 20,000 tonnes in the fourth quarter from Euope, the Middle East and Brazil – against a slumping of demand have recently aggravated the pressure on prices, traders said.

Production of synthetic rubber and acrylonitrile-butadiene-styrene (ABS), the major downstream sectors for BD, has been reduced, with producers keeping low inventory of products amid fears of another global recession.

Synthetic rubber is used in the production of tyres for the automotive industry while ABS is used in a wide range of finished products, including household appliances, office equipment and toys.

“There is limited spot appetite because the ongoing eurozone debt crisis and a faltering US economy have dampened sentiment and prompted Asian businessmen to adopt a cautious stance,” a trader said.

Europe and the US are major export markets for Asian economies including China, South Korea, Taiwan and Japan.

($1 = €0.74)

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

By: Helen Yan
+65 6780 4359

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