Asia BD may still fall despite supply disruptions in SE Asia

12 April 2017 05:36 Source:ICIS News

Car tyres 12 April

SINGAPORE (ICIS)--Spot butadiene (BD) prices in Asia may still have room to fall despite supply disruptions in Malaysia and Singapore this week, due to sluggish demand.

Spot prices have plummeted to $1,375/tonne CFR (cost and freight) northeast (NE) Asia on 7 April, down by 55% from February, ICIS data showed.

The price slump was largely on account of shrinking demand and swollen inventories amid falling prices in downstream synthetic rubber (SR) and natural rubber (NR) markets, market sources said.

This week, however, Lotte Chemical Titan unexpectedly shut its petrochemical complex – including the two crackers – in Pasir Gudang, Malaysia, while the No 1 cracker of Petrochemical Corporation of Singapore (PCS) in Ayer Merbau on Jurong Island is having technical issues and will be taken off line next week.

“Even though BD supply may tighten due to these unplanned outages, there is no demand as it needs about a month to clear the bloated inventories at shore tanks in China,” a trader said.

Lotte Chemical Titan has a 100,000 tonne/year BD unit at the Pasir Gudang complex.

PCS’ No 1 cracker has a 450,000 tonne/year ethylene capacity and a 60,000 tonne/year BD extraction unit. Its No 2 cracker has a 650,000 tonne/year ethylene capacity and a 100,000 tonne/year BD extraction unit.

Lotte Chemical Titan was in the process of restarting its plants in Pasir Gudang following resumption of water supply to the site on Tuesday afternoon. Its crackers with a combined ethylene capacity of 720,000 tonnes/year are expected to resume production within the week.

Singapore’s PCS will shut its No 1 cracker on 17 April to fix a compressor problem, a company source said.

Notwithstanding these production hiccups, BD prices may continue their downward spiral in the absence of strong demand, market sources said.

“There are too much inventories of BD, SR and NR in China and we expect BD prices to continue falling to below $1,200/tonne CFR NE Asia into May as there is no spot appetite and we hear that China BD suppliers are seeking to export as well,” another trader said.

China is a major importer of BD in Asia.

Spot prices of derivatives SR and NR have also been falling due to dwindling demand from tyre makers amid bearish market sentiment.

Focus article by Helen Yan

Asia BD, SBR, PBR 12 April

Picture (top): Butadiene (BD) is a raw material used in the production of synthetic rubbers, which go into tyres for the automotive industry. (Source: WestEnd61/REX/Shutterstock)

By Helen Yan