29 January 2013 06:16 [Source: ICIS news]
By Helen Yan
SINGAPORE (ICIS)--Spot butadiene (BD) prices in Asia may stabilise at around $1,850/tonne (€1,369/tonne), as buying activities start to wind down in the weeks leading to the Lunar New Year holiday, industry sources said on Tuesday.
For seven weeks straight, BD prices were on an uptrend, racking up 28% of gains since end-November last year to $1,880/tonne CFR (cost and freight) NE (northeast) Asia on 25 January, according to ICIS.
“BD prices will likely remain flat or soft[en] until after the Lunar New Year, as demand is weak, but buying interest is expected to pick up after the holiday, which may then see BD prices going up,” a Chinese trader said.
Chinese players will be out of the market for a full week on 9-15 February for the festivity.
“There won’t be much spot appetite for BD during this period and end-users will not support any further price increases if there are no margins,” a downstream synthetic rubber producer said.
BD’s surging prices – with the average cumulative gain of $410/tonne in a span of about two months – is a big concern for the downstream synthetic rubber makers, in particular, the butadiene rubber (BR) producers, which are being constrained from hiking their product prices because of poor demand.
Synthetic rubbers are raw materials used for the production of tyres for the automotive industry.
BD producers have raised their offers last week for second-half February shipments to above $1,900/tonne CFR NE Asia.
“There is no room for BD prices to go higher or we will shut down our plant,” a downstream Chinese BR maker said.
A number of BR producers in China and South Korea are currently operating their facilities at 50-70% of capacity, as the high cost of BD is continuing to erode their margins.
These include Shandong Huamao New Material and TSRC-UBE (Nantong) Chemicals in China, as well as Korea Kumho Petrochemical Co (KKPC) and LG Chem in South Korea.
BD’s upward momentum, however, appears very much intact and the expected respite as Chinese buyers withdraw from the market may just last two weeks, market sources said.
Chinese demand for BD is expected to pick up in the second half of February, with three new downstream BR plants – with a combined capacity of 300,000 tonnes/year –due to come on stream in China in the second quarter.
Any delay in the start-up schedule of these plants could take the wind out of BD’s price spike, industry sources said.
“Some of the new Chinese BR plants may delay their start-ups as demand for BR seems rather weak and it is difficult for BR prices to go up above $2,500/tonne CFR NE Asia,” another downstream BR producer said.
($1 = €0.74)
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