11 July 2013 11:55 [Source: ICIS news]
LONDON (ICIS)--An oversupply of butadiene capacity (BD) means a recovery in BD and styrene butadiene rubber (SBR) prices is probably further away than was expected earlier this year, a bank said on Thursday.
“The market weakness remains apparent with Asian BD spot prices – the key global pricing driver – moving below $900/tonne on BD oversupply, poor demand, reduced downstream operating rates and additional BD capacity coming on stream in July,” noted Piotr Drozd, a chemical industry analyst at Prague-based investment bank WOOD & Company.
In China, Wuhan Petrochemical and Sichuan Petrochemical are set to add to the oversupplied BD market by bringing on stream a 120,000 tonne/year BD unit and a 150,000 tonne/year BD unit, respectively, while in Taiwan, CPC Corp is scheduled to start operations at its 100,000 tonne/year BD installation.
Concluding his analysis of the current direction of the BD and SBR markets, Drozd added: “The new BD capacities are likely to struggle to find sufficient demand, however, given the reduced operating rates of Asian SBR/PBR [polybutadiene rubber] producers. Anecdotal evidence shows downstream operating rates reduced to 60-70%... or even 50% [at some east Asian BD producers]. In this context, we believe that the recovery in BD and SBR prices may prove to be a more lengthy process than we had initially expected.”
On Wednesday sources said European SBR July contract prices had fallen by €170/tonne ($218/tonne) because of a sharp drop in feedstock costs, oversupply and weak demand.
The price of feedstock BD fell by €250/tonne in July.
European SBR sellers were unwilling to pass on the full BD feedstock decrease, arguing that their margins had lately come under immense pressure, meaning they could not afford to further lower prices.
Nevertheless, SBR prices have fallen to levels not seen since early 2010.
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