Asia BD looks set to fall lower in March amid weak demand

Focus article by Helen Yan

SINGAPORE (ICIS)–Asia butadiene (BD) prices have dipped below $2,000/tonne and look set to fall lower in March because of swollen inventories and dwindling demand, according to market sources.

BD spot prices averaged $2,050/tonne CFR (cost and freight) northeast (NE) Asia on 17 March, down by 32% since early February, ICIS data showed. (please see chart below)

Enquiries for April shipments have dried up with major BD exporters in Asia turning their attention to their respective domestic markets or exploring options for deep-sea exports.

About 13,000 tonnes of BD from Asia have been exported to the US Gulf and South Africa in March but the arbitrage window to the US Gulf has closed, given weakening prices in April in the US Gulf.

Supply in April exceeds demand as several major downstream synthetic rubber (SR) producers have reduced their operating rates or are shut for maintenance.

Major SR producer, Korea Kumho Petrochemical Co (KKPC) will shut its 380,000 tonne/year styrene butadiene rubber plant and 80,000/tonne acrylonitrile butadiene rubber (NBR) plant in Ulsan in April for maintenance.

 “We have no enquiries from China or other buyers for butadiene… it has been very quiet,” a northeast Asian BD producer said.

In the meantime, sellers were heard willing to unload their stocks at around $1,800/tonne CFR NE Asia, but this price level drew limited buying interest given the relentless sharp falls in the Chinese domestic BD market.

Chinese domestic BD prices have plummeted by more than yuan (CNY)12,000/tonne since early February due to oversupply and weak demand.

Chinese domestic BD prices fell to 12,500/tonne ex-works in north China and CNY14,000/tonne ex-works in east China on 23 March, according to data by ICIS China.

“It is going to be a big drop in price this March, as traders with BD stocks on hand, might be forced to lower their prices sharply to around the $1,500/tonne CFR NE Asia if they wish to attract any buying interest,” a trader said.

“We have no interest in buying BD spot cargoes as we are covered for April, and the synthetic rubber market is not doing well,” a downstream SR producer said.

“The downstream synthetic rubber market is very poor as our customers, the tyre makers, have switched to using more natural rubber (NR) in their formulations, and demand for SR has weakened,” the downstream SBR producer added.

NR and SR are rival substitutes in the production of tyres for the automotive industry and their prices tend to impact each other.