Asia BD may extend falls on supply glut, softening demand

Focus story by Helen Yan

SINGAPORE (ICIS)–Spot butadiene (BD) prices in Asia may continue falling, with supply outstripping demand amid an influx of deep-sea cargoes and new capacity coming on stream in China, industry sources said on Wednesday.

About 20,000 tonnes of BD from Europe, Brazil and the Middle East are expected to arrive in Asia in September, with more than 10,000 tonnes spot material coming in from Europe alone, traders said.

Traders with stocks on hand have been offloading surplus stocks at discounts, with trades heard  this week at  $1,410-1,420/tonne CFR (cost and freight) northeast (NE) Asia, market sources said.

On August 8, BD spot prices were assessed at an average of $1,470/tonne CFR NE Asia, down by 10% or $160/tonne from 25 July, ICIS data showed.

The downward price pressure is expected to intensify since demand is waning, market players said.

“BD prices have already dropped to $1,410/tonne CFR NE Asia, so why not $1,300/tonne CFR NE Asia in September? It is possible,” a downstream synthetic rubber producer said.

Asia – which is due to receive higher-than-usual volumes of deep-sea BD cargoes next month – is already awash with BD supply, which was further augmented by the recent start-up of a new 90,000 tonne/year plant of Shanghai SECCO in China.

“SECCO will start delivering their BD supply soon and BD prices will continue to fall further,” a downstream Chinese SBR producer said.

Demand, on the other hand, is weak as a number of downstream polybutadiene rubber (PBR) and styrene butadiene rubber (SBR) plants running at reduced capacity across the region, market sources said.

BD is a raw material for the production of synthetic rubbers, such as PBR and SBR, which go into the manufacture of tyres for the automotive industry.

Among synthetic rubber producers that are running their plants at reduced rates are Korea Kumho Petrochemical Co (KKPC), Shen Hua Chemicals in China, Taiwan Synthetic Rubber Corp (TSRC) and Sinopec Shanghai Gaoqiao.

In southeast Asia, BD supply is also ample, prompting regional producers to seek outlets for their surplus stocks via sales tenders, but market response has been tepid.

The sales tenders have been attracting fewer and lower bids from traders recently, as customers in northeast Asia are able to satiate their spot appetite with deep-sea material.

Southeast Asian customers are currently adequately covered by term contracts, with spot cargoes originating from the region usually being shipped by traders to northeast Asia.

“Any fresh tenders will attract fewer bids as traders will not take the risk, and will instead, adopt a wait-and-see stance, given the oversupply situation. It is a buyers’ market  and buying ideas have fallen to below $1,400/tonne CFR NE Asia,” a trader said.

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