By John Richardson
The remarkable rollercoaster that is butadiene, and its derivatives, continues.
Although the synthetic rubber market for tyres in China appears to be strengthening, acrylonitrile butadiene styrene (ABS) remains under pressure.
And, in a reflection of what is a structurally extremely tight market for butadiene, LG Chem is talking about further reducing operating rates at its Daesan synthetic rubber plant in South Korea.
The pricing chart below illustrates the extraordinary volatility in butadiene prices.
This is likely to continue for a few more years, at least. In circumstances like these, buyers tend to frequently panic and overstock in anticipation of further price rises and then operate inventory for longer than would be normal, leading to repeated cycles of sharp price increases and declines.
In China, confusion over the strength of auto markets cannot be helping. While, of course, replacing tyres represents a much-bigger volume business these days thanks to the surge in auto sales in 2009-10, sales of new autos are slowing down.
Can the petrochemicals industry fix the problem of not enough butadiene? A fascinating debate on this subject took place at last month's 7th ICIS World Olefins Conference in Brussels.
The story of butadiene also serves to illustrate how, in this business, sheer luck plays a huge role in success.
Ten billion dollars in earnings before interest, taxes, depreciation and amortisation (EBITDA) were transferred from the world's butadiene consumers to its suppliers during 2011, estimated Rafael Cayuela, butadiene commercial manager for Styron, the global plastics, latex and rubber producer, during the conference.
"This was exactly the same product, the same customers and the same suppliers - nothing had changed except, of course, the supply and demand fundamentals," he added.