Price and market trends: Asia BD uptrend may taper off on weak China demand, new supply

02 May 2014 10:06 Source:ICIS Chemical Business

Weak downstream synthetic rubber markets have lowered run rates at derivative plants

Spot butadiene prices in Asia may halt their uptrend soon amid prevailing weak Chinese demand and with new supply coming on stream in the next few months, market sources said on 26 April.

On 18 April, BD spot prices were assessed at $1,350-1,400/tonne CFR (cost and freight) northeast (NE) Asia, up by $200/tonne since 21 March, according to ICIS data. “We cannot support BD prices at above $1,250/tonne CFR NE Asia because of the weak domestic synthetic rubber market and our margins have been eroded by the recent BD price surge,” a Chinese SBR producer said.

China’s appetite for spot BD imports has been weak given a lacklustre domestic downstream synthetic rubber market, industry sources said.

In the key China market, a number of SBR and BR plants have been operating at reduced rates amid a slowing Chinese economy, market sources said.

Aggravating the downside pressure on BD prices is additional capacity – totalling 325,000 tonnes/year – that is due to come on stream in China and southeast Asia in the months ahead.

In China, Fujian Refining & Petrochemicals (FREP) is expected to start up its new 60,000 tonne/year BD extraction unit in Fujian province in May, while Shanghai SECCO Petrochemical is expected to begin production at its 90,000 tonne/year BD unit in June.

FREP will have a total of 180,000 tonne/year BD capacity with the start-up of the new unit. It currently operates a 120,000 tonne/year BD unit. Shanghai SECCO, on the other hand, will double its BD capacity to 180,000 tonne/year by June.

In southeast Asia, the Petrochemical Corporation of Singapore (PCS) is expected to start up its 100,000 tonne/year BD unit in May. It currently operates a 60,000 tonne/year BD plant.

Meanwhile, PTT Global Chemical has recently started up its new 75,000 tonne/year BD unit in Thailand, market sources said. However, an open arbitrage window to the US may continue to support BD prices in Asia, market sources said.

About 11,000 tonnes of Asian BD are scheduled to be shipped to the US in May, bringing the total shipments from Asia to the West to about 50,000 tonnes since mid-February, market sources said.

Supply in the US and Europe is tight amid plant outages and production issues, thus opening up the window for arbitrage trades from Asia.

US BD producer TPC Group declared force majeure in early April because of production issues at one of its facilities in Texas. US cracker operators such as ExxonMobil and LyondellBassell, meanwhile, are conducting maintenance at their crackers in Texas.

In Europe, LyondellBasell declared force majeure on BD in early February at its unit in Wesseling, Germany.

Heavy exports to the US and EU market have been the main driving force for the BD’s price rebound in Asia, market sources said.

By Helen Yan