By Malini Hariharan
A question that every butadiene buyer has been asking for a long time is when will prices ease?
There are no signs yet although buyers are threatening to cut production.
Butadiene rose by more than $200/tonne last week to $3,080-3,120/tonne CFR Northeast Asia, reports my colleague Helen Yan on ICIS news.
Prices have been driven up by a number of cracker outages and turnarounds in Asia, Europe and the US. Butadiene supplies have tightened over the last year and the more recent shutdowns at two Iranian plants (Jam Petrochemical and Amir Kabir) and Shell's cracker in Singapore have not helped matters.
Butadiene prices have risen by around 50% since January.
But buyer resistance is on the rise and some are planning cuts in production.
Kumho Petrochemical, Asia's largest synthetic rubber producer, will shut a 70,000 tonnes/year styrene butadiene rubber (SBR) plant and cut operating rates at a second 100,000 tonnes/year plant in May.
Other SBR producers in Asia too are reportedly contemplating production cuts. Additionally, a few SBR producers have planned maintenance shutdowns in the coming weeks.
However, the production cuts may not materialise if high butadiene costs can be passed on. And there are signs that this is happening.
SBR prices in India have crossed $4000/tonne and are likely to remain firm in May, reports ICIS news.
Tyre producers are willing to pay high prices as they expect SBR availability to remain constrained because of production disruptions in Japan.
"We have received enquiries from some tyre producers in Japan. Their suppliers in Japan were not able to deliver their contract cargoes because of power outages and extensive damage to infrastructure after the earthquake," said a Korean SBR producer.
If this continues, SBR and butadiene can continue their upward march and provide much -needed relief to Asian cracker operators who have been hit by weak pricing for other derivatives.