FocusOutput cuts/shutdowns at Asia crackers may temper BD falls

05 June 2012 06:01  [Source: ICIS news]

By Helen Yan

BD is a raw material used in the manufacture of synthetic rubbers, which go into tyre production.SINGAPORE (ICIS)--Production cuts and shutdowns at some Asian crackers could temper the continuous slide in butadiene (BD) prices in the region, although demand is expected to remain weak, industry sources said on Tuesday.

With supply diminishing, BD prices may get a reprieve and bottom out in June, and possibly stage a rebound in July, they said.

Spot BD prices have declined by $600/tonne (€480/tonne), or 24%, from early May to $1,850-1,900/tonne CFR (cost and freight) northeast (NE) Asia in the week ended 1 June, according to ICIS.

BD spot prices have been on a roller-coaster ride over the past seven months  dipping to $1,550/tonne CFR NE Asia in November 2011, then rallying to $4,000/tonne CFR NE Asia in February 2012, before steadily plummeting from March to May this year because of poor demand amid uncertainties in the global economy.

“The month of June may see the BD price falling to $1,500/tonnes CFR or lower as several downstream synthetic rubber plants have either cut or shut down,” a trader said.

Among the synthetic rubber producers that either shut their plants or cut their production because of poor market conditions are China’s Jilin Petrochemical, Huayu Rubber, Shen Hua Chemical Industrial and Korea Kumho Petrochemical (KKPC).

“We are pushing for a lower BD price at $1,500/tonne CFR NE Asia for late-June shipment as demand is very weak and supply is ample,” a Chinese synthetic rubber producer said.

But weak demand may be offset by shrinking supply, as several cracker operators and BD producers in China, Taiwan and South Korea decided to either reduce run rates at plants or time their maintenance while market conditions are still poor.

Taiwan’s Formosa Petrochemical Corp (FPCC) had shut its biggest naphtha cracker in Mailiao on 31 May. The cracker, with a 1.3m tonne/year ethylene capacity, will be down for about two weeks.

The company’s other two crackers, with ethylene capacities of 700,000 tonne/year and 1.03 m tonnes/year, are currently running at reduced capacity.

In South Korea, Yeochun NCC (YNCC) – a major cracker operator and BD producer in Asia – plans to cut runs at its 240,000 tonne/year BD plant at Yeosu to 70% for a week from 11 June because of a mechanical problem. Repairs will be done at the heat exchanger of the BD unit, a company source said.

Meanwhile, YNCC has also reduced operating rates at its three naphtha crackers in Yeosu to 90% of capacity because of poor margins.

China’s Yangzi Petrochemical, a subsidiary of Sinopec, plans to shut its 650,000 tonne/year naphtha cracker in Nanjing, China, for 50 days of maintenance from mid-July.

($1 = €0.80)

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

By: Helen Yan
+65 6780 4359

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