Price and market trends: Asia butadiene prices to stabilise but major rebound unlikely

07 December 2012 10:31  [Source: ICB]

While prices could flatten, a major rebound is unlikely as inventories are taken down

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.

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 on 30 November.

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 week ended 30 November 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.

BD supply will slightly tighten in December, with a major regional cracker operator - South Korea's Yeochun NCC (YNCC) - planning to cut production.

On the demand front, however, BD consumption from the SR sector and another downstream industry - acrylonitrile-butadiene-styrene (ABS) - has remained sluggish.

"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.

Major automakers 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.

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 to cut production at its northeast Asian neighbour.

A consequent decline in SR demand in Asia saw some 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, a company source said.

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.

By: Joseph Chang
+1 713 525 2653

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