OUTLOOK ’18: Asia BD uptrend to be tempered by influx of deep-sea cargoes

21 December 2017 02:35 Source:ICIS News

SINGAPORE (ICIS)--Asia’s butadiene (BD) prices may continue to increase but the uptrend will be tempered by an influx of deep-sea cargoes in January and February next year.

In the week ended 15 December, spot BD prices averaged $1,175/tonne CFR (cost and freight) northeast (NE) Asia, up by about 20% since early November, ICIS data showed.

“The BD price may still rise further due to re-stocking but it will be difficult to see a sharp spike in prices in early 2018 as buyers are more cautious and there is a lot of deep-sea cargoes coming during this time,” a trader said.

More than 50,000 tonnes of BD from Europe, the US, Middle East and Latin America are scheduled to arrive in Asia in the next two months.

Re-stocking activities are expected to pick up ahead of the Lunar New Year holiday in February 2018.

The Lunar New Year, which falls on 16 February in 2018, is celebrated in most parts of northeast and southeast Asia. China, which is a key market for BD, will be on holiday for a full week on 15-21 February.

Buying interest typically intensifies prior to the Lunar New Year, but this time, buyers are adopting a cautious stance.

Buyers, particularly the major synthetic rubber (SR) producers, had seen their margins eroded or wiped out in early 2017 due to unexpected spikes in BD prices.

SBR producers are major consumers of BD.

In February, BD prices soared to $3,000/tonne CFR NE Asia, up by nearly 40% from late December 2016, ICIS data showed.

Market players were caught by surprise by the price surge at the start of 2017, and have taken a more cautious approach on the market for the coming year.

“The downstream SR producers are reluctant to support BD above $1,200/tonne CFR NE Asia due to erosion in margins, so we expect the BD price to be in the range of $1,100-1,200/tonne CFR NE Asia in January and February,” a trader said.

But those in the acrylonitrile butadiene styrene (ABS) sector, another derivative of BD, may be able to accommodate further increases in feedstock prices as they are enjoying good production margins.

“The downstream ABS makers will take the lead and will be able to support BD price above $1,200/tonne CFR NE Asia easily,” another supplier said.

Expectations of weaker BD imports from China as its domestic capacity will increase by more than 300,000 tonnes in 2018, may weigh down on the market.

Currently, China imports about 300,000 tonnes of BD each year.

 

The new BD capacities in China include Jiangsu’s Sailboat Petrochemical’s 100,000 tonne/year unit; Bluestar New Chemical Materials’ 50,000 tonne/year unit; Shenhua Ningxia Coal Industry’s 65,000 tonne/year unit; and CNOOC and Shell Petrochemicals Co (CSPC’s) new 165,000 tonne/year unit.

Jiangsu Sailboat, Bluestar New Chemical Materials and Shenhua Ningxia Coal Industry have already started up in late 2017, but the impact has been muted so far due to their small capacities.

However, the CSPC’s new 165,000 tonne/year BD unit at Huizhou, will likely have some impact on the BD import price when it starts up in March in 2018.

Other key consumers in the region, such as South Korea and Taiwan, however, will continue to have some influence on the BD price.

South Korea imports more BD compared with China, taking in an annual volume of about 400,000-500,000 tonnes.

“There is no reason for the BD price to fall as demand is still strong,” a South Korean BD supplier said.

Outlook article by Helen Yan

Picture: A labourer at a tyre factory in China. Butadiene (BD) is used in the production of synthetic rubbers, which go into tyres for the automotive industry. (Source: View China Photo/REX/Shutterstock)

By Helen Yan