FocusWeak demand to temper Asia BD price gains amid tight supply

27 March 2012 07:16  [Source: ICIS news]

By Helen Yan

SINGAPORE (ICIS)--Butadiene (BD) prices in Asia can still increase because of tighter-than-expected supply in April, but upside may be tempered by soft demand amid declines in spot values of downstream butadiene rubber (BR) products, industry sources said on Tuesday.

Speculative trades pushed up BD prices by $200/tonne (€150/tonne) over the past three weeks, with BR producers being forced to either cut or shut down production to prevent losses, they said.

Spot BD prices were assessed at $3,550-3,600/tonne CFR (cost and freight) northeast (NE) Asia in the week ended 23 March, according to ICIS.

“We expect the BD price to rise a little bit further above $3,600/tonne on tight supply but the downstream synthetic rubber producers cannot pay higher than this,” a trader said.

“The traders are free to speculate, but their activities are making it very difficult for the synthetic rubber makers to operate,” a major South Korean synthetic rubber maker said.

BR prices shed $50/tonne last week to $3,800-3,850/tonne CFR NE Asia, ICIS data showed, bringing the actual BR-BD spread to $200-300/tonne – barely half the required $600-700/tonne for BR makers to generate any margins.

BD is a raw material for BR, which is used in the manufacture of tyres for the automotive industry.

“If the BD price continues to rise, it will eventually destroy demand and many synthetic rubber players will have no choice but to cut [output] or shut down their plants,” another South Korean synthetic rubber maker said.

LG Chem will shut down its 80,000 tonne/year BR line at Daesan, South Korea, in April, but will continue to run its other two 50,000 tonne/year BR lines at normal rates, a company source said.

The company may also consider taking its 135,000 tonne/year styrene butadiene rubber (SBR) plant off line, the source said.

Korea Kumho Petrochemical Co (KKPC), meanwhile, plans to bring forward a planned turnaround at its 140,000 tonne/year BR line to early April. The 20-day shutdown was initially scheduled late next month. KKPC has a total BR capacity of 350,000 tonnes/year.

Asia’s BD supply is expected to remain tight in April, given planned turnarounds and outages at regional crackers and BD units, industry sources said.

South Korea’s YNCC and Honam Petrochemical; Japan’s Tosoh Corp and Mitsubishi Chemical; and, China’s Lanzhou Petrochemical have scheduled maintenance at their crackers.

In Japan, a number of crackers are currently running at reduced rates of 80-85% because of high naphtha costs, industry sources said.

At midday, Asian naphtha prices stood at $1,091.50-1,094.50/tonne, CFR Japan, up $4.00-5.00/tonne from the previous day’s close. Naphtha hit a 45-month high of $1,115.50/tonne CFR Japan in early March, according to ICIS.

Japanese chemical producer Showa Denko is likely to keep its 690,000 tonne/year naphtha cracker in Oita shut beyond end-March because of minor problems.

It shut the first line of the cracker on 4 March, for furnace repairs and maintenance, with the restart date initially set on 31 March. The No 2 line was taken off line on 13 March and was supposed to come back on line on 23 March.

In China, Zhenhai Refining & Chemical Co (ZRCC), a subsidiary of state-owned petrochemical major Sinopec, plans to shut its 165,000 tonnne/year BD unit at Ningbo in Zhejiang on 15 April for a month of maintenance.

($1 = €0.75)

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

By: Helen Yan
+65 6780 4359

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