Price and market trends: Asia BD uptrend may fizzle out; downstream SR makers cut output

04 July 2014 10:13 Source:ICIS Chemical Business

As China’s economy continues to slow, BR and SBR producers plan further production cutbacks

Spot butadiene (BD) prices in Asia may soon stop rising with downstream synthetic rubber (SR) producers further cutting production because of deteriorating margins, market players said on 25 June.

BD prices have gained 13% since end-May to average $1,475/tonne CFR (cost and freight) northeast (NE) Asia on 20 June, according to ICIS data.

“We are seeing a softer buying sentiment this week as buyers are not so keen to consider BD offers at above $1,450/tonne CFR NE Asia,” a trader said.

Major downstream SR producers have been running their plants at reduced rates because of weak market conditions amid a slowing Chinese economy.

Butadiene rubber (BR) and styrene butadiene rubber (SBR) makers in China, South Korea and Taiwan have plans to further cut production if BD prices continued spiralling up.

“SBR is now losing money with the feedstock BD costs rising so sharply and we will extend the shutdown of our SBR plant,” a Chinese SBR producer said.

Non-oil grade SBR prices were assessed at $1,880-1,920/tonne CIF (cost, insurance and freight) China on 20 June, unchanged from the previous week, ICIS data showed.

“[The BD] market seems to be softening now as a lot of buyers have started to retreat from the market,” another trader said.

A major BD buyer said: “We will wait for offers to fall lower, so nowadays, no deals.”

Korea Kumho Petrochemical Co (KKPC) – Asia’s largest SR producer – intends to further bring down the operating rate at its 340,000 tonne/year BR plant to 35% in July from 45% currently. Run rates at its 560,000 tonne/year SBR plant, meanwhile, will be lowered to 75-80% next month from 85% currently.

Taiwanese producer TSRC cut the operating rate at its 100,000 tonne/year SBR plant in Kaohsiung on 25 June to 60-70% from 100% previously, a source said.

“If the feedstock BD price continues to rise, we will maintain the operating rate at 60-70% capacity from now till the end of August prior to our shutdown in September,” the source said.

Chinese producer Shen Hua Chemical, meanwhile, will extend the shutdown of one of its three SBR lines by another week to 16 July, citing negative production margins because of rising BD costs. The company has three 60,000 tonne/year SBR lines in Nantong. All three lines were shut on 15 June for a 25-day turnaround. Two lines will restart on 10 July as scheduled.

By Helen Yan