Asia BD may halt decline as more supply heads to US, Europe

By Helen Yan

SINGAPORE (ICIS)–Spot butadiene (BD) prices in Asia may stop falling as regional supply tightens with more regional material heading to the US and Europe next month, market sources said on Wednesday.

But a sharp price rebound is unlikely because of prevailing weakness in downstream synthetic rubber market, they said.

BD prices have shed more than $230/tonne since end-February to $1,180-1,200/tonne CFR (cost and freight) northeast (NE) Asia on 14 March, according to ICIS data.

The price decline over the past two consecutive weeks is expected to be arrested soon as major producers in South Korea are expected to export 5,200 tonnes more BD to the US in April, in addition to the 15,000 tonnes shipped out in February and March, market sources said.

“We have no BD spot available for April and we expect BD prices to bottom out in the near term,” a northeast Asian BD producer said.

Meanwhile, some 5,000 tonnes of BD from southeast Asia are expected to be delivered to Europe, which is suffering from supply shortage amid a combination of planned and unplanned plant shutdowns, market sources said.

Deep-sea trades to the West will help constrain Asia’s oversupply, but weakness in the key China domestic market amid poor downstream synthetic rubber prices will continue to weigh on import BD prices, market sources said.

BD prices in China’s domestic market have plummeted by more than yuan (CNY) 2,500/tonne since mid-February to CNY8,500-9,000/tonne DEL (delivered) on 14 March, according to Chemease, an ICIS service in China.

To stem the BD’s price downtrend, a number of BD producers in Asia have decided to cut production.

South Korea’s Lotte  Chemical will shut down its 150,000 tonne/year BD unit at Daesan in April and its 130,000 tonne/year BD unit at Yeosu in May for about one week of maintenance each, while the Petrochemical Corporation of Singapore (PCS) has reduced the operating rate of its 60,000 tonne/year BD unit at Jurong island to 80-85% in March.

Several cracker shutdowns in Asia from February to July, including CPC’s 720,000 tonne/year unit in Taiwan and Shanghai SECCO Petrochemical’s 1.2m tonne/year unit in China are also expected to help restrict the region’s BD supply.

Despite these moves to cut BD supply in Asia, downstream synthetic rubber producers do not expect BD prices to increase by much as new BD plants are expected to come on stream in the second quarter.

“China remains oversupplied with BD and the downstream synthetic rubber market remains weak, so it will be difficult for  BD prices to rebound sharply and to maintain its uptrend in the second quarter,” a Chinese synthetic rubber producer said.

China’s Sichuan Petrochemical is expected to start commercial production at its new 150,000 tonne/year BD plant in April in Sichuan province, while Fujian Refining & Petrochemicals (FREP) plans to start up its new 60,000 tonne/year BD extraction unit in Fujian province in late May or early June.

FREP will have a total BD capacity of 180,000 tonnes/year with the start-up of the new unit. Another Chinese producer, Shanghai SECCO, also plans to double its BD capacity to 180,000 tonnes/year by June.

In southeast Asia, Thailand’s PTT Global Chemical (PTTGC) is expected to start up its new 75,000 tonne/year BD unit at the end of March, while in Singapore, PCS will expand its BD capacity to 160,000 tonne/year when its new 100,000 tonne/year unit starts up in May.

“BD prices are likely to fluctuate in the second quarter. There may be some rebound up to above $1,300/tonne CFR NE Asia, but the rebound may not be sustainable, given that BD supply is ample, and that the synthetic rubber market is also likely to remain soft during this period,” a Chinese trader said.

A number of downstream synthetic rubber producers in China, including Zhechen Rubber, Shen Hua Chemical, TSRC-UBE Chemical and YPC-GPRO Rubber Co have either shut down their plants for maintenance or are running their styrene butadiene rubber (SBR) and butadiene rubber (BR) plants at reduced rates because of weak demand.

SBR and BR go into the production of tyres for the automotive industry.

“It is still uncertain whether prices will rebound as there is also the possibility that prices may continue to fall if demand continues to remain weak. Let us wait and see what will happen in China. It is all so unpredictable,” a trader said.

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