FocusWeak Asia BR to persist on poor demand as China growth slows

19 October 2012 05:52  [Source: ICIS news]

By Helen Yan

Toyota car manufacturing plant in Tianjin, ChinaSINGAPORE (ICIS)--Butadiene rubber (BR) prices in Asia may remain weak for the remainder of the year, with demand recovery unlikely amid a slowing Chinese economy, industry sources said on Friday.

The market is also being weighed down by falling values of feedstock butadiene (BD), they said.

On 18 October, BR prices fell by $50/tonne (€39/tonne) week on week to $2,650-2,750/tonne CFR (cost and freight) northeast (NE) Asia, according to ICIS.

Feedstock BD prices have also been under downward pressure in October. In the week ended 12 October, BD prices were assessed at an average of $1,900/tonne CFR NE Asia, down by about $100/tonne from mid-September, ICIS data showed.

“We do not expect the [BR] market to improve, given the weak sentiment and poor economic data [in China],” a Chinese BR producer said.

China, which is a key market for BR in Asia, posted a third-quarter GDP growth of 7.4% – its slowest expansion in more than three years.

Growth in the world’s second biggest economy has continued to decelerate since the start of the year, after a 7.6% growth in the second quarter and an 8.1% expansion in the first, official data showed.

“It looks like the BR market will most probably be flat in the fourth quarter as demand has been slower-than-expected in the region,” another Asian BR producer said.

The World Bank has warned of slower economic expansion in China, saying that weak exports and lower investment growth will slow down the country’s GDP growth to 7.7% this year from 9.2% in 2011.

The country’s territorial spat with Japan over a group of islands in the East China Sea is making matters worse given its negative repercussions on China’s overall car output and sales and adversely affect BR consumption.

BR is used in the production of tyres for the automotive industry.

Chinese buyers have shunned buying Japan-branded vehicles because of the dispute, leading to a plunge in sales of Japanese cars.

Japan’s car manufacturing giants Toyota Motor Corp, Nissan Motor Co and Honda Motor Co had reported sharp declines in China sales for September – at 48.9%, 35.3% and 40.5%, respectively.

A number of Chinese BR producers have either shut or cut output in view of the poor market conditions.

Dushanzi Petrochemical’s 30,000 tonne/year BR plant at Urumqi in Xinjiang province was taken off line on 15 October for 10 days of maintenance.

In Jiangsu province, TSRC-UBE (Nantong) Chemical Industrial’s 72,000 tonne/year BR plant will be shut in November for about a month of maintenance – the fourth time that the unit will be shut because of poor market conditions.

In India – another major emerging economy in Asia – automotive sales have also been dwindling because of rising fuel prices, high interest rates and fears of a global recession, industry sources said.

The Society of Indian Automobile Manufacturers has tempered its growth expectations for car sales in the current financial year ending March 2013 to 1%-3% from its previous estimate of 9%-10%.

“The market is really dull and has been very frustrating as sales of BR have been very slow,” a trader said.

($1 = €0.77)

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections
Request a free ICIS sample report for the latest prices and development in the Asian petrochemical markets

By: Helen Yan
+65 6780 4359

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