Asia BD may extend gains; offers spike on tight supply

Focus article by Helen Yan

SINGAPORE (ICIS)–Butadiene (BD) prices in Asia may continue to increase as spot supply availability is being curtailed by scheduled turnarounds, as well as outages, at regional crackers and BD units, market sources said on Thursday.

Spot offers for the material have spiked by more than $100/tonne this week, with traders snapping up recent tenders at the equivalent price of more than $1,500/tonne CFR (cost and freight) NE (northeast) Asia.

“With such prices… it is only right to say that offers should be around the $1,550/tonne CFR NE Asia level,” a trader said.

On 26 June, BD spot prices were assessed at $1,360-1,420/tonne CFR NE Asia on 26 June, surging nearly 30% since mid-May, according to ICIS data.

Supply has been limited, with Formosa Petrochemical Corp’s (FPCC) 700,000 tonne/year No 1 cracker in Mailiao, Taiwan, currently undergoing turnaround and will not restart until 20 July.

Wuhan Petrochemical’s 120,000 tonne/year BD unit in Hubei, China, on the other hand, is on a three-week maintenance, and will resume production on 17/18 July.

Chandra Asri’s force majeure following an outage at its 600,000 tonne/year cracker in Indonesia early in June also exacerbated the tight supply conditions for BD in Asia.

Its cracker restarted on 16 June, while its 100,000 tonne/year BD extraction unit, which had a technical glitch that shut it down early in the month, resumed operations on 21 June.

Early this week, India’s Reliance Industries Ltd (RIL) sold 3,500 tonnes of BD at $1,350/tonne FOB (free on board) Mumbai, while Malaysia’s Lotte Chem Titan sold a 2,000-tonne cargo at $1,440/tonne FOB Pasir Gudang, market sources said.

“These two sales tenders are the only spot cargoes available for now,” a second trader said.

Traders have been snapping up whatever spot material is available, while end-user buyers have retreated from the “tough” market, a trader said.

Taking into account freight costs of $80-150/tonne, RIL and Lotte Chem Titan’s fixtures prices this week would be equivalent to $1,500-1520/tonne CFR NE Asia, market sources said.

“Synthetic rubber (SR) makers cannot accept BD prices at this level, buyers are not interested at all in this high price,” a major synthetic rubber producer said.

BD is a raw material for the production of synthetic rubbers such as styrene butadiene rubber and polybutadiene rubber (PBR).

Synthetic rubber producers have been hurting from negative margins caused by the continued spike in BD prices.

“We will shut down and cut our operating rates further as margins have now fallen into negative territory,” another synthetic rubber producer said.

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