FocusTight supply to nudge up Asia BD but weak demand to cap gains

27 January 2014 06:50  [Source: ICIS news]

By Helen Yan

BD is used as raw material for synthetic rubbers like styrene butadiene rubber (SBR), which is used in the manufacture of tyres for the automotive industry.SINGAPORE (ICIS)--Limited availability of spot cargoes could buoy up Asia’s spot butadiene (BD) prices after the Lunar New Year holidays, but gains would likely be capped by continued weakness in demand from the downstream synthetic rubber market, industry sources said on Monday.

On 24 January, BD spot prices were assessed at $1,490-1,520/tonne CFR (cost and freight) NE (northeast) Asia, according to ICIS.

Major South Korean BD producers have hiked their offers for February shipments to $1,500-1,550/tonne FOB (free on board) Korea on the back of limited spot availability.

“We are committed contractually and have no spot available for February,” a South Korean BD producer said.

With intra-regional freight costs at around $60/tonne, BD offers will rise to  $1,560-1,610/tonne CFR NE Asia, market sources said.

 “Prices may go up modestly after the Lunar New Year in February, on limited spot availability but the downstream synthetic rubber prices are weak and it will be difficult to see a big price increase,” a trader said.

The Lunar New Year, which falls on 31 January, is celebrated in most parts of northeast and southeast Asia. Its celebration in the key China market lasts a week, during which all markets will be closed.

BD spot availability is expected to be tighter than expected as a number of crackers in Asia are scheduled to shut for turnaround between February and June, while deep-sea supply from Europe appears to have dried up, market sources said.

Among the crackers that are due for maintenance are CPC Corp’s 720,000 tonne/year no 6 cracker in Taiwan, Shanghai Secco’s 1.2m tonne/year cracker in China and Keiyo Ethylene’s 740,000 tonne/year cracker in Japan.

Meanwhile, Asia is not expected to receive any deep-sea BD supply from Europe, as cargoes are likely to be diverted to the US, where margins are better, according to market sources.

In October 2013-January 2014, Asia has been receiving about 5,000 tonnes of BD from Europe on a monthly basis, they said.

“There will be no cargo from Europe coming to Asia in February, so supply may be a bit tighter, but on the other hand, the downstream synthetic rubber prices are very soft, so we do not expect BD prices to rise significantly,” the trader said.

BD is used as raw material for synthetic rubbers like styrene butadiene rubber (SBR), which is used in the manufacture of tyres for the automotive industry.

Non-oil grade 1502 SBR prices have been flat since the start of the year, averaging $1,925/tonne CIF (cost, freight and insurance) China, ICIS data showed.

Vehicle sales has remained lacklustre across key Asian markets amid continued weakness in the global economy.

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

By: Helen Yan
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