FocusAsia BD to halt fall; run rate cuts/LPG switch at crackers eyed

22 July 2013 06:13  [Source: ICIS news]

By Helen Yan

BD is a raw material used in the production of synthetic rubbers such as styrene butadiene rubber (SBR) and butadiene rubber (BR) that go into the production of tyres for the automotive industry.SINGAPORE (ICIS)--Spot butadiene (BD) prices in Asia may stop falling on prospects of lower supply, with cracker operators eyeing production cuts or a switch to using liquefied petroleum gas (LPG) as feedstock to yield lesser output of the olefin, industry sources said on Monday.

BD prices have been spiralling downwards since mid-February, shedding 60%, because of oversupply and continued weakness in demand amid the global economic downturn.

On 19 July, BD was assessed at an average of $870/tonne (€661/tonne) CFR (cost and freight) northeast (NE) Asia, according to ICIS data.

“We are looking at switching to LPG as an alternative feedstock to naphtha, which is too expensive and has eroded our margins,” a South Korean BD producer said.

At midday, open-spec first-half September naphtha prices were at $914-917/tonne CFR (cost and freight) Japan.

The South Korean producer expects its monthly BD output of 20,000 tonnes to fall by about 5-10% once it switches its cracker feed to LPG from naphtha.

Other olefins producers in the region are also mulling cutting production in late August or September, industry sources said.

Asia’s BD market is currently oversupplied, prompting delays in start-ups of new extraction units that were originally slated to begin production in June or July, they said.

Sichuan Petrochemical will delay the start-up of its 150,000 tonne/year BD unit in China to September, while CPC Corp still awaits approval from the Taiwanese government to begin production at its new 100,000 tonne/year BD unit.

Regional cracker operators have been running their facilities at near full capacity, taking into account improved margins for ethylene and propylene, consequently building up the inventory of by-product BD at a time of slumping demand.

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

Most synthetic rubber producers in Asia have resorted to production cuts amid a weak global automotive industry and with China – the world’s second biggest economy and its largest automotive market – slowing down.

Asian SBR major Korea Kumho Petrochemical Co (KKPC) has plans to cut operating rates at 480,000 tonne/year SBR plant to around 80% of capacity late this month. Its other 340,000 tonne/year BR plant is currently running at around 50% of capacity, down from 60-70% in June, a company source said.

“BD prices are bottoming out and we expect prices to rebound in the coming weeks, as we received several enquiries for spot cargoes from Chinese traders, ” a Korean BD supplier said.

Chinese buying interest for BD was triggered last week when major local producer, Sinopec, increased its domestic prices for synthetic rubber products by yuan (CNY) 500-1,000/tonne ($81-163/tonne) to around CNY11,000/tonne EXWH (ex-warehouse) for both non-oil grade 1502 SBR and BR.

However, Chinese traders are also adopting a prudent stance given uncertainties over the sustainability of the price uptrend in the domestic synthetic rubber market.

“Right now, most China traders are cautious, we will wait and see,” a Chinese trader said.

($1 = €0.76 / $1 = CNY6.14)

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

By: Helen Yan
+65 6780 4359

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