FocusAsia BD to stabilise after 8-week fall; rebound unlikely in Dec

30 November 2012 06:39  [Source: ICIS news]

By Helen Yan

SINGAPORE (ICIS)--Spot butadiene (BD) prices in Asia could soon stabilise after eight weeks of uninterrupted decline, supported by tightening supply, but values may not rebound in December as traders offload surplus stocks, industry sources said on Friday.

Traders are being forced to sell at lower prices amid tepid demand to get rid of inventory before the year closes, they said.

“Spot offers have dropped below $1,500/tonne (€1,155/tonne) CFR (cost and freight) NE (northeast) Asia and prices are likely to bottom out soon,” a Japanese trader said.

From 28 September to 23 November, BD prices have steadily declined, shedding an average of $420/tonne to $1,590/tonne CFR NE Asia, according to ICIS.

Buying indications in the current week from downstream synthetic rubber (SR) makers have dropped to around $1,450/tonne CFR NE Asia for December and early January shipments, industry sources said.

SR producers are the major consumers of BD.

BD supply with slightly tighten next month, with a major regional cracker operator – South Korea’s Yeochun NCC (YNCC) planning to cut production. YNCC has three crackers with a combined ethylene capacity of 1.9m tonnes/year, and has a BD capacity of 240,000 tonnes/year.

On the demand front, however, BD consumption from the SR sector and another downstream industry – acrylonitrile-butadiene-styrene (ABS) – has remained sluggish, with plants running at reduced rates given weakness in global market conditions.

“The market is very poor and the synthetic rubber producers have no choice but to cut their production output,” a northeast Asian SR maker said.

The slump in the global automotive industry, which has led to job and production cuts among the major automotive makers and tyre makers in Europe and the US, has eroded demand for SR and ABS.

SR is a major raw material used in the production of tyres, while ABS is used in parts and components for the automotive industry.

Major auto-makers including General Motors, Ford Motor and Peugeot have announced plans to shut production lines in Europe, while global tyre makers including Bridgestone, Michelin and Goodyear, have also temporarily ceased operations at some plants in these regions.

Asia has not been spared from the slump in the global automotive industry given the region’s role as a major production centre for the automotive and tyre industry.

Aggravating the gloomy market conditions for the car industry is the territorial spat between Japan and China that prompted Japanese auto-maker such as Toyota, Honda and Nissan to cut production at its northeast Asian neighbour.

A consequent decline in SR demand in Asia saw a number of regional SR makers cutting production.

In China, Fushun Petrochemical’s new 200,000 tonne/year styrene butadiene rubber (SBR) plant, which just started up in late October, is currently running at low rates, industry sources said.

Shen Hua Chemicals will also run its 180,000 tonne/year SBR plant in Nantong at 90% of capacity after restarting in mid-November following a month-long turnaround, according to a company source.

In Taiwan, TSRC has cut the operating rates at its 100,000 tonne/year SBR plant at Kaohsiung, Taiwan, to 80% in November from an average of 85-90% in October.

Among ABS makers that reduced production is Toray Plastics Malaysia, which is currently running its 330,000 tonne/year plant in Penang at 60-70% of capacity, having closed two of its six lines early this month for repairs.

($1 = €0.77)

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


By: Helen Yan
+65 6780 4359



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