(By Wikimedia Commons)
TAIPEI (Taiwan News) — The price of butadiene, the main raw material in synthetic rubber, reached a 56-month high at US$3,070 per metric ton. The price has doubled over the last three months.
Industry insiders said that the price of high-grade butadiene has reached an unaffordable level for some rubber manufacturers, forcing them to use lower-grade butadiene or to halt production of final products, Apple Daily reported.
Some insiders believe that the price increase will continue after the Lunar New Year, affecting related stocks when the Taiwan Stock Exchange reopens. Stocks that may come under pressure due to the rising prices include TSRC Corp. (2103), Nantex Industry Co., Ltd. (2108) and Formosan Rubber Group Inc. (2107).
Earlier in January, TSRC said that it would cut production in response to the rising prices to reduce risk, according to a UDN report.
According to Platts, butadiene prices increased 3.7% in the past week from an average price of US$2960 per metric ton in the previous week. The publication noted that on Jan. 10, China Petroleum and Chemical Corp. (Sinopec) increased its ex-works butadiene offers in eastern China to RMB21,000 per metric ton (US$2,542) on an import parity basis, an increase of 7.7%, due to tight supply. Meanwhile, strong demand for downstream products such as styrene-butadiene-rubber, SB latex and acrylonitrile-butadiene-styrene persists.
The supply of butadiene is partly caused by the continued increase in car sales in China, which increases demand for tires. Flooding in Thailand has also reduced rubber output.
Industry insiders said that last week’s butadiene rally in the Chinese market might result in a supply shortage from the largest segment of the petrochemical industry, as some companies will be forced to cut or even halt manufacturing. Domestic rubber manufacturers may be forced to use their own butadiene inventory to make up the difference in production.
In the long term, the price increase may ease with overseas imports. After the Lunar New Year, downstream manufacturers in China and Taiwan will reduce deliveries, which will increase the overall supply of butadiene and rebalance the market.
