FocusAsia BD prices may rise in Jan if more Europe cargoes go to US

19 December 2012 03:19  [Source: ICIS news]

By Helen Yan

A large cargo shipSINGAPORE (ICIS)--Asia butadiene (BD) prices may rise further in January 2013 on speculative trades as deep-sea cargoes from Europe are diverted to the US, but gains may be capped by lacklustre end-user demand, industry sources said on Wednesday.

More than 30,000 tonnes of BD from Europe is scheduled to arrive in Asia in January and February, but some parcels may be diverted to the US if prices in Asia are not attractive enough compared with the US, industry sources said.

“US buyers can accept $1,700/tonne (€1,292/tonne) and unless Asian buyers are willing to pay this price, the cargoes from Europe will head to the US,” a Japanese trader said.

However, BD prices are unlikely to spike to this price level in the near term if demand remains subdued and cracker rates are not further reduced, industry sources said.

“Cracker rates is the key factor in determining whether the BD prices will rise further as end-user demand in Asia seems rather slow,” another  trader said.

“It is mostly speculative trades by traders which may push BD prices up to $1,700/tonne but it is difficult for the downstream synthetic rubber makers to accept more than $1,550/tonne as demand for synthetic rubber is slow,” a Chinese synthetic-rubber maker said.

In the week ended 14 December, BD spot prices averaged $1,550/tonne CFR (cost and freight) northeast (NE) Asia, up by $40/tonne from the previous week.

Prior to the recent price rebound, BD spot prices have been declining since September because of abundant supply and weak demand.

BD spot prices bottomed out to average $1,470/tonne CF NE Asia on 30 November, down by about $25% since 28 September, when prices averaged  $2,010/tonne CFR NE Asia, ICIS data showed.

The downstream synthetic rubber market has remained weak because of the slump in the global automotive market amid the ongoing eurozone debt crisis and concerns over the fallout from the “fiscal cliff” in the US.

Synthetic rubber including styrene butadiene rubber (SBR) and butadiene rubber (BR) are major raw materials in the production of tyres for the automotive industry.

BD comprises about 75% of SBR production while BR is formed from the polymerisation of BD.

Major tyre makers based in Asia, including Bridgestone, Continental, Hankook and Michelin, export their tyres to other regions including Europe and the US.

Meanwhile, several major downstream synthetic rubber producers in Asia, including Korea Kumho Petrochemical Co (KKPC), Taiwan’s TSRC and China’s Fushun Petrochemicals have reduced their operating rates because of weak market conditions.

South Korea’s KKPC has further cut the operating rate of its 330,000 tonne/year BR plant at Yeosu, to 50% of capacity from 70-75% in November while Taiwan’s TSRC may continue to run its100,000 tonne/year SBR plant in Kaoshiung at 80% of capacity in January if market conditions do not improve.

In China, Fushun Petrochemical is operating its new 200,000 tonne/year SBR plant in Liaoning, in northeast China, at 40% of capacity since starting up in late October.

($1 = €0.76)

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

By: Helen Yan
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