Asia BD may extend falls on weak demand, China market slump

SINGAPORE (ICIS)–Spot butadiene (BD) prices in Asia may continue to spiral down in June due to weak demand and amid the slump in China’s domestic market.

“Buying indications have now all fallen below $1,000/tonne CFR [cost and freight] NE [northeast] Asia after the Chinese BD producers cut their offers on Thursday,” a trader said.

Regional BD suppliers, however, were still holding out for $1,100/tonne CFR NE Asia, with a major South Korean producer managing to sell June cargoes to its domestic market.

BD prices in Asia had fallen by 19% since late April to $1,075/tonne CFR NE Asia on 19 May, ICIS data showed.

In the Chinese domestic market, most producers led by petrochemical giant Sinopec reduced their BD offers on Thursday afternoon, reversing price hikes announced early in the week.

Sinopec cut its domestic BD ex-works prices in north China by yuan (CNY) 500/tonne ($73/tonne) to CNY8,500/tonne effective 25 May.

In the case of Liaoning Huajin Tongda, it decided to cut prices on Thursday afternoon by CNY1,000/tonne, after issuing a price increase of CNY500/tonne early on the same day.

The sudden price reversal in the Chinese market sent regional market players fleeing to the sidelines to wait for a clearer picture, scuttling ongoing spot discussions, traders said.

“Discussions were ongoing for June shipments, but the buyers decided not to continue the discussions after China BD producers cut their prices on Thursday,” a trader said.

Chinese demand for fresh June BD imports has waned because of impending arrivals of regional and deep-sea BD cargoes next month.

In the meantime, a slowdown in China’s automotive sector has weighed on demand for synthetic rubber – the main downstream for BD.

Synthetic rubbers such as styrene butadiene rubber (SBR) and polybutadiene rubber (PBR) are used in the production of tyres for the automotive industry.

China is the world’s largest automotive market.

“The Chinese synthetic rubber market is calm, there is almost no demand due to the slowing automotive sector,” a Chinese synthetic rubber producer said.

In April, vehicle sales in the country fell by 2.2% year on year to 2.08m units, according to data from the China Association of Automobile Manufacturers (CAAM). On a month-on-month basis, vehicle sales fell by 18.1%.

Focus article by Helen Yan

Picture: Tyres at a manufacturing plant in China. Butadiene (BD) is a raw material in the production of synthetic rubbers, which go into tyres for the automotive industry. (Source: ImagineChina/REX/Shutterstock)

($1 = CNY6.87)