FocusAsia PBT may rise on cost pressures; weak demand to cap gains

13 July 2012 07:19  [Source: ICIS news]

By Heng Hui

SINGAPORE (ICIS)--Polybutylene terephthalate (PBT) prices in Asia may firm up in the next few months, backed by rising cost of raw materials, but the gains will likely be limited by weak demand, market sources said on Friday.

PBT values were at $2.05-2.20/kg (€1.68-1.80/kg) CIF (cost, insurance and freight) NE (northeast) Asia, and at $1.95-2.05/kg CIF India on 10 July, down by $0.1-0.2/kg from the previous week, they said.

Suppliers are not keen to cut offers, with prices of feedstocks for production – butanediol (BDO), purified terephthalic acid (PTA) – on the rise.

PBT is a thermoplastic polyester produced through esterification and polycondensation of terephthalic acid and 1, 4-butanediol. Around 0.76 tonnes of PTA and 0.5 tonnes of BDO are needed to produce 1 tonne of PBT.

On 10 July, bulk butanediol (BDO) prices increased to $2,050-2,150/tonne CFR (cost and freight) China, up by $50/tonne from the previous week, according to ICIS, with values being driven up by restocking activities.

ICIS data also showed that PTA gained 5% in the week ended 6 July, bolstered by strong energy prices, firmer Chinese PTA futures and tight spot availability.

Cost factors aside, PBT prices are under pressure to fall because of continued weakness in demand amid a gloomy macroeconomic environment, market players said.

Chinese buyers are only purchasing from domestic sources, while other buyers in northeast Asia are not in a hurry to procure cargoes given tepid demand in downstream industries, they said.

China is a net importer of PBT. In May this year, the country’s PBT imports totalled 19,817 tonnes, representing a 12.7% increase from April, official data showed.

In 2011, China imported 154,340 tonnes of PBT, and exported 93,435 tonnes of the material, according to China Customs.

PBT is widely used in electronic, electrical, communications, fibre optics and automotive industries.

Taking into account dwindling consumption amid the global economic uncertainties, Chinese PBT producers are running their facilities at reduced rates, industry sources said.

“Most plants are not operating at full capacity. If we operate fully, there will be a supply glut in the market,” said a China-based producer with plants in Korea.

Some of the PBT plants were producing only on a per-order basis, he said.

Some Chinese producers decided to shut their plants for turnaround while the market is weak.

Xin Jiang Blue Ridge Tunhe Polyester’s 60,000 tonne/year natural-grade PBT plant in Xinjiang province has been shut since 15 May.

Yizheng Chemical Fibre’s 60,000 tonne/year line, which is part of its total 80,000 tonne/year PBT production capacity in Jiangsu, was taken off line on 20 June for 20 days of turnaround.

Buyers in China said that international suppliers were bringing in material into the country and then selling the cargoes locally, leading to fewer straight import trades that are denominated in US dollars.

This meant that the cargoes could be repacked and sold in smaller lots than the actual freight container sizes.

ICIS is launching an Asian PBT report in mid-August and will be assessing the Indian and northeast Asian prices. Taiwan and Japan are the biggest exporters of PBT in Asia, while India and Korea are the biggest buyers of natural grade PBT in the region.

Asia has a total PBT capacity of around 700,000 tonnes/year, representing more than 60% of the total global capacity for the product, according to ICIS data.

The region’s demand for PBT is expected to grow at an annual rate of about 4-5%, in line with the region’s average economic growth, with electrical applications accounting for 60-70% of the total consumption for natural grade PBT, industry sources said.

($1 = €0.82)

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

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By: Heng Hui
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