Asia BD poised to rebound as buying interest returns

Focus article by Helen Yan

SINGAPORE (ICIS)–Spot butadiene (BD) prices in Asia look set to rebound, with regional producers hiking offers this week on the back of strong buying interest, market sources said on Friday.

Spot offers increased by $100/tonne this week to $1,100-1,150/tonne CFR (cost and freight) northeast (NE) Asia for late-November and early December shipments, they said.

“We have received several enquiries from buyers this week but we have sold out all our November cargoes,” a regional BD producer said.

On 24 October, BD spot prices were assessed at $1,000-1,050/tonne CFR NE Asia, plunging by 33% or $500/tonne from 19 September, according to ICIS data.

Recent sharp losses in crude and naphtha prices sent BD prices tumbling in October, as traders, fearing that prices would decline further, liquidated their stocks in hand, market sources said.

“BD spot prices have bottomed out and have rebounded as buying interest has picked up, a trader said.

“With BD prices hitting $1,000/tonne CFR NE Asia the previous week, BD producers have the option to either co-crack or hydrogenate BD, which will take the BD out of the market, and stem the BD price fall,” the trader said.

BD was in oversupply this month, causing the heavy pressure on prices, as demand slackened with a number of downstream synthetic rubber (SR) producers in Asia either running their plants at reduced rates or shut for maintenance.

Major SR producer, Korea Kumho Petrochemical Co (KKPC) shut its 540,000 tonne/year styrene butadiene rubber (SBR) plant and 340,000 tonne/year polybutadiene rubber (PBR) plant for maintenance in October.

A slowing Chinese economy and weak macroeconomic conditions had also forced several downstream SR plants in China to run at reduced capacity, market sources said.

China, the world’s largest automotive market and its second-biggest economy, posted a slower annual economic growth of 7.3% in the third quarter compared with 7.5% in the second quarter.

Indonesia and Thailand, the two biggest economies in southeast Asia, are also showing signs of weakness.

The two countries are major production centres for the automotive industry, and their weaker-than-expected economic performance has weighed on demand for raw materials, market sources said.

Indonesia is expected to post an average growth of 5.1-5.5% this year, according to its central bank. The country registered a second-quarter annual expansion of 5.1% – the lowest in five years.

Thailand, on the other hand, is projected to grow at an average of around 1.5% in 2014, lower than the 2% forecast in July, according to a senior official at the country’s finance ministry.

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