S Korea's Kumho Petrochemical may further cut BR output

29 March 2012 05:21  [Source: ICIS news]

SINGAPORE (ICIS)--South Korea’s Kumho Petrochemical (KKPC) may have to cut the operating rate of its 210,000 tonne/year butadiene rubber (BR) plant at Yeosu to 85% of capacity if current market conditions do not improve, a company source said on Thursday.

The company may also extend the shutdown of another 140,000 tonne/year BR plant in Yeosu, the source said.

Asian BR makers have been hard hit by the high feedstock (BD) costs and falling BR prices, resulting in their margins falling into negative territory.

Spot price of feedstock BD rose by $150/tonne (€113/tonne) to $3,550-3,600/tonne CFR (cost and freight) northeast (NE) Asia while BR prices shed $50/tonne last week to $3,800-3,850/tonne CFR NE Asia, ICIS data showed.

A spread of about $600-700/tonne is required 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.

“We will shut the 140,000 tonne/year BR plant from 10 April to 5 May for scheduled maintenance but we may extend the turnaround if the BR market does not improve,” the source said.

KKPC is a major Asian BR producer and has a total BR capacity of 350,000 tonnes/year.

BR prices have been under downward price pressure because of poor demand from the downstream tyre sector amid concerns over a slowing global economy.

BR producers have tried to raise offers to $4,000-4,300/tonne CFR (cost and freight) Asia for April shipments but this was met with stiff resistance from the buyers.

Spot offers have since dropped to around $3,850/tonne CFR Asia this week, traders said.

With Europe mired by the ongoing eurozone debt crisis and Chinese and Indian economies expected to slow down this year, demand for BR from the downstream tyre producers has also weakened.

The tyre makers, who are major consumers of BR, have retreated to the sidelines and adopted a cautious stance.

“Demand for BR is very weak and we have not received any enquiries from the tyre producers,” a trader said.

The Chinese government has revised the GDP growth target for this year to 7.5%, down from 8% target that was kept for seven years.

India’s economy is forecast to grow 6.9% in the current fiscal year ending 31 Mach, its slowest pace in three years.

BR producers in Asia include JSR Corp, Shanghai Gaoqiao Petrochemical, LG Chem, TSRC Corp, Ube Industries and BST Elastomers.

($1 = €0.75)

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By: Helen Yan
+65 6780 4359

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