FocusAsia BD may extend falls after 14% slump on weak demand

01 May 2012 05:52  [Source: ICIS news]

By Helen Yan

SINGAPORE (ICIS)--Spot butadiene (BD) prices in Asia look set to continue falling, after shedding 14% last week to below $3,000/tonne (€2,280/tonne), as demand weakened because of shutdowns at downstream plants, industry sources said on Tuesday.

BD prices declined to $2,750-2,800/tonne CFR (cost and freight) northeast (NE) Asia in the week ended 27 April, down $450/tonne from the previous week, according to ICIS.

“BD prices are in free fall now and I will not be surprised if prices were to drop further to around or below $2,000/tonne,” a trader said.

A number of downstream synthetic rubber and plastics producers in China, South Korea and Taiwan have either cut production or completely shut down their plants in view of the poor global market conditions.

“We expect BD to drop further in May as spot interest is very weak given the global economic slowdown,” another trader said.

Softer demand for synthetic rubbers – one of the main downstream sectors of BD – prompted major regional producers such as South Korea’s Kumho Petrochemical, LG Chem; Taiwan’s TSRC, and; China’s Shen Hua Chemical, Jilin Petrochemical and Fuxiang Chemical to reduce run rates at their facilities or take the plants off line for maintenance.

BD is the feedstock for synthetic rubbers, such as styrene butadiene rubber (SBR) and butadiene rubber (BR), which are used in the production of tyres for the automotive industry.

Tyre makers in China, which is a key importer of synthetic rubber in Asia, are mostly running their plants at reduced capacities of 50-60% amid declines in sales in the domestic and export markets, given weakening demand for cars amid the global economic weakness.

China is the second biggest economy in the world and ranks as the largest car market globally. But its auto sales shrank 3.4% year on year in the first quarter of 2012, after registering a much subdued growth of 2.5% for the whole of 2011, official data showed.

According to the European Rubber Journal, the world’s truck tyre replacement sales in March have declined across all markets, citing statistics from global tyre producer Michelin.

While North America registered a 9.4% annual increase in truck tyre sales last month, its truck tyre replacement sales declined 11.2%.

In Europe, March original equipment demand for truck tyres fell 2.8% year on year, while tyre truck replacement sales declined by a steeper 26.5%, according to Michelin.

In Brazil, OE sales also fell by 15.8% in March, with tyre replacement sales rising 4.4%, the European Rubber Journal said citing statistics from Michelin.

($1 = €0.76)

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

By: Helen Yan
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