Asia BD halts rebound as upstream crude, naphtha fall

Focus article by Helen Yan

SINGAPORE (ICIS)–Spot butadiene (BD) prices in Asia had a short-lived rebound and will likely soften in the coming weeks because of heavy losses in upstream crude and naphtha markets, industry players said on Thursday.

On 7 November, BD spot prices were assessed unchanged at $1,050-1,100/tonne CFR (cost and freight) northeast (NE) Asia, after gaining $50/tonne in end-October, according to ICIS.

Weak Chinese economic data amid a glut in global crude supply have dampened sentiment in the BD market, prompting the downstream synthetic rubber producers to hold back their raw material purchases, market sources said.

BD goes into the manufacture of synthetic rubbers such as polybutadiene rubber (PBR) and styrene butadiene rubber (SBR) – which are used in the production of tyres for the automotive industry.

“We will wait and see as the market is very uncertain, and the crude and naphtha prices can fall lower,” a downstream synthetic rubber producer said.

Oil prices have shed 30% since June, with Brent crude for December delivery dipping below $80/bbl on Wednesday before closing at $80.18/bbl. US crude prices, on the other hand, closed at a three-year low overnight at $77.18/bbl.

“There is a lot of uncertainty now, with Brent crude falling below $80/bbl and and naphtha falling below $670/tonne CFR Japan,” a trader said.

If crude and naphtha prices continue their downtrend, BD prices are likely to fall further, market sources said.

“Buying sentiment has changed to one of caution and hesitation in view of the uncertain market outlook, given the  possibility of lower crude and naphtha prices,” another trader said.

“It is difficult to have a clear picture of the BD price trend, but likely to remain soft in the near term, given the weak crude prices,” a second downstream synthetic rubber producer said.

Spot BD prices had a week of gain on 31 October after steadily spiralling downward since mid-September, shedding 33%, according to ICIS data.

Weak demand from the downstream synthetic rubber (SR) producers and acrylonitrile butadiene styrene (ABS) producers is also likely to continue weighing on BD prices, market players said.

A number of downstream SR and ABS producers in China are running their plants at reduced capacity of around 60% amid a slowing Chinese economy, market sources said.

In October, China’s purchasing managers’ index (PMI), which is a barometer of manufacturing activities – has dropped to 50.8 – a five-month low. A PMI reading above 50 indicates expansion while a reading below 50 denotes contraction.

New export orders index fell by to 49.9 in October from 50.2 in September, while the import index slipped to 47.9 from 48.0.

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