SINGAPORE (ICIS)--Spot butadiene (BD) prices in Asia may still have room to fall in the near term because of poor demand from downstream synthetic rubber (SR) market.
For May-shipment BD, prices on 6 April fell to $1,250-1,300/tonne CFR (cost and freight) northeast (NE) Asia, down by $50/tonne from the previous week, according to ICIS data.
Prices have fallen by more than 11% since 9 March, the data showed.
BD is a raw material for the production of synthetic rubbers such as SBR and PBR, which go into tyres for the automotive sector.
“Our margins are being eroded. We cannot support BD above $1,200/tonne CFR NE Asia,” a synthetic rubber producer said.
A number of downstream SBR and PBR producers in Asia have reduced their operating rates in April amid the slump in synthetic rubber prices. These include Taiwan Synthetic Rubber Corp (TSRC), Thai Synthetic Rubbers and Zhejiang Transfar Synthetic Material.
“Buyers have retreated and [are] holding back their BD purchases. There is still room for the BD price to fall lower to around $1,200/tonne CFR NE Asia,” a trader said.
SBR and PBR prices have been under downward pressure due to continued weakness in the natural rubber (NR) market.
NR is a substitute feedstock for SBR and PBR in the production of tyres for the automotive industry.
“NR, at around $1,350/tonne is about $300/tonne and $400/tonne cheaper compared with SBR and PBR, respectively, and this weak NR price has dragged the SBR and PBR prices down,” a rubber trader said.
Meanwhile, a looming trade war between the US and China – the world’s two largest economies – has been weighing down on overall market sentiment.
China is now the world’s largest automotive market, having overtaken the US in recent years. Major US automotive makers, including General Motors and Ford, have production plants in China.
“Sentiment has really been dampened by all this trade war talks. It has really caused a lot of uncertainty, made players very cautious, and [is] not good for business,” a synthetic rubber producer said.
Focus article by Helen Yan
Picture: Inside a tyre factory in Hefei, Anhui province, China. (Source: View China Photo/REX/Shutterstock)