SINGAPORE (ICIS)–Spot butadiene (BD) prices in Asia look set to further fall in the near term as buying interest in the key China market has diminished amid softness in the upstream naphtha market, industry sources said on Monday.
On 25 September, BD prices averaged $885/tonne CFR (cost and freight) northeast (NE) Asia, down $55/tonne from the previous week, ICIS data showed.
“We expect BD prices to fall further this week as Chinese buying interest is limited with China [players] mostly in a holiday mood,” a trader said.
Chinese players have wound down their activities in the market and have mostly retreated ahead of China’s week-long National Day celebration on 1-7 October, market sources said.
“We expect BD to fall below $850/tonne CFR NE Asia in the near term, as the key Chinese market will be closed on 1 October for a week and Chinese buyers are looking to buy at a lower price,” a downstream synthetic rubber producer said.
Weakness in the upstream naphtha market is exacerbating the downward pressure on BD prices, industry sources said.
“We expect BD prices to drop lower, given the weak Chinese demand and soft naphtha prices,” a trader said.
At midday, naphtha prices were at $444.50-446.50/tonne CFR Japan, according to ICIS.
“There is still room for BD to weaken further as cracker operators have sufficient margins, given the soft naphtha prices,” the SR producer said.
Naphtha prices fluctuated between $400-450/tonne CFR Japan since late August, ICIS data showed.(Please see table below)
“If the naphtha price continues to remain at this price level, there is room for the BD price to drop lower,” the trader said.
At current prices, the naphtha-BD spread is wide at about $440/tonne. Cracker operators can generate decent margins with the spread at $250-300/tonne, market sources said.
Demand for BD has been waning as downstream SR producers, including Korea Kumho Petrochemical and Taiwan Synthetic Rubber, have either shut down their facilities or are about to take their plants off line next month for maintenance.
Synthetic rubbers, such as styrene butadiene rubber (SBR) and polybutadiene rubber (PBR) that go into the tyres for the automotive sector, are the main downstream end-use of BD.
In China, several SBR and PBR producers have also either cut output or extend their plant shutdowns, freeing up excess BD cargoes into the spot market, market sources said.
YPC-GPRO (Nanjing) Rubber plans to extend the shutdown of its 100,000 tonne/year SBR plant beyond October. The unit was shut on 5 August for maintenance and was originally scheduled to restart in September after a 40-day turnaround.
Sinopec Shanghai Gaoqiao has also shut its 120,000 tonne/year PBR plant on 26 September for maintenance until 18 November.
“We are covered for October and as BD supply is more than enough, we expect BD prices to fall further in October,” a Chinese SBR producer said.
“It may be just a temporary fall – there are several cracker shutdowns in the fourth quarter and the naphtha price may turn bullish, which will lift up the BD price,” another trader said.
