FocusOversupply to plague Asia BD market as demand stays weak

09 July 2013 06:28  [Source: ICIS news]

By Helen Yan

BD is a raw material used in the production of synthetic rubbers, such as SBR and BR, that go into tyres for the automotive industry.SINGAPORE (ICIS)--Asia’s butadiene (BD) prices may continue to fall, with supply being bloated by high run rates at regional crackers amid shrinking demand from downstream synthetic rubber sector, industry sources said on Tuesday.

The market is widely expecting Chinese petrochemical major Sinopec to announce sharp cut in domestic BD prices in China – a move that would weigh on import prices.

On 5 July, spot BD spot prices averaged $1,025/tonne (€800/tonne) CFR (cost and freight) NE (northeast) Asia, with BD halving its value over the past four months, according to ICIS data.

“Demand is really weak, and we expect BD prices may drop further to below $900/tonne CFR NE Asia soon because the crackers are running full, and more BD supply is coming on stream,” a downstream synthetic rubber producer said.

Asia’s cracker operators are running at near-full capacity to take advantage of improved margins for ethylene and propylene, consequently building up inventory of by-product BD.

Further pressure on BD prices can be expected once Sinopec decides to cut its domestic prices by yuan (CNY) 1,300/tonne ($212/tonne) to CNY7,000/tonne, which is equivalent to around $950/tonne CFR (cost and freight) northeast (NE) Asia, market sources said.

“Buyers are now pushing prices even lower – to $800-850/tonne CFR NE Asia – as demand is weak and there is too much supply,” a China-based trader said.

Over the next two months, Asia will have 470,000 tonnes/year in new BD capacity coming on stream in China, Taiwan and Indonesia.

In China, Wuhan Petrochemical’s 120,000 tonne/year BD unit and Sichuan Petrochemical’s 150,000 tonne/year BD unit are due to start up this month.

In Taiwan, on the other hand, CPC Corp is scheduled to start operations at its 100,000 tonne/year BD unit this month, while in Indonesia, Chandri Asri will start trial runs at its new 100,000 tonne/year BD unit in July, with commercial production slated in August, industry sources said.

On the demand side, however, prospects are looking grim with a number of downstream styrene butadiene rubber (SBR) and butadiene rubber (BR) producers in northeast Asia cutting production because of a sluggish global automotive market, industry sources said.

BD is a raw material used in the production of synthetic rubbers, such as SBR and BR, that go into tyres for the automotive industry.

Major South Korean BR producer, Korea Kumho Petrochemical Co, plans to further cut production at its 340,000 tonne/year BR plant in Yeosu – eyeing a run rate of 50% this month from 60-70% currently.

Taiwan Synthetic Rubber (TSRC) will also cut run rates at its 100,000 tonne/year SBR plant to 80-90% this month, while China’s Shen Hua Chemical Industrial is keen to keep a 60-70% run rate at its 180,000 tonne/year SBR plant until the unit’s scheduled maintenance in October.

($1 = €0.78 / $1 = CNY6.14)

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

By: Helen Yan
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