Asia BD makers turn to ABS from synthetic rubbers amid margin erosion

Author: Helen Yan

2020/06/15

SINGAPORE (ICIS)--Asian butadiene (BD) producers are turning to the acrylonitrile butadiene styrene (ABS) market for demand amid eroded margins and weak buying interest from main downstream synthetic rubber sector.

“The downstream ABS makers use less BD and can afford to pay more for BD, so some BD suppliers will continue to hold out for higher prices due to the eroded margins,” a trader said.

ABS accounts 15-20% of the BD market, while synthetic rubbers have a much bigger share at roughly 70%, according to market sources.

Regional BD producers have been unwilling to offload cargoes at below $400/tonne CFR (cost and freight) northeast (NE) Asia following recent spikes in crude and naphtha costs.

But supply in the region is ample and will further grow given an estimated 150,000 tonnes of deep-sea cargoes from Europe and the US arriving in Asia in the second and third quarters.

This condition dampens spot buying interest from major consumers in the styrene butadiene rubber (SBR) and polybutadiene rubber (PBR) markets, widening the gap between buying and selling ideas.

On 12 June, spot BD prices were assessed down $10/tonne week on week at $330-400/tonne CFR NE Asia, ICIS data showed.

“Naphtha price is similar to BD price, and regional producers will hold out for at least $400/tonne CFR basis due to the margins erosion,” a trader said.

At midday, naphtha prices stood at $341/tonne CFR Japan, ICIS data showed.

BD must be higher than naphtha by about $100-150/tonne for BD producers either to break even or generate margins depending on their costs structure and sales strategy,  market sources said.

“The market is imperfect, it will eventually find its equilibrium,” a regional BD producer said.

Focus article by Helen Yan

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