SINGAPORE (ICIS)–Asia’s butadiene (BD) prices may drift below $1,800/tonne (€1,386/tonne) this month after a 9% slump last week, as supply outstrips demand because of a weak downstream synthetic rubber market, industry sources said on Tuesday.
On 8 March, spot prices were assessed at $1,860/tonne CFR (cost and freight) northeast (NE) Asia, down by $190/tonne or 9% from the previous week, according to ICIS.
Demand has remained subdued, much to the chagrin of traders that had stocked up on BD earlier in anticipation of a resurgence in Chinese demand after the week-long Lunar New Year holiday. The key China market was on holiday from 9-15 February.
Instead, major BD consumers – the synthetic rubber producers – retreated to the sidelines after the Lunar New Year, forcing traders with BD stocks-in-hand to cut their prices below $1,900/tonne CFR NE Asia last week to draw buying interest, industry sources said.
“There are more cargoes chasing too few customers, so traders were forced to [lower] the BD prices if they wished to attract buyers,” an industry source said.
BD is a raw material used in the manufacture of synthetic rubbers, which go into tyres for the automotive sector.
A sluggish global automotive market has weakened demand for synthetic rubbers and consequently, for raw material BD.
In February, car sales in China and India have fallen. China is the world’s largest automotive car market, while India is an emerging market for automotive makers.
Major car makers, including General Motors, Honda Motor and Mazda Motor reported lower sales in China last month, while Maruti Suzuki and Tata Motors reported steep falls in sales in India in the same period.
In light of the weak macroeconomic conditions, synthetic rubber producers, in particular, the butadiene rubber (BR) makers, have been finding it difficult to raise prices amid a strong resistance from the tyre makers.
Asia BR makers have attempted to hike offers to $2,700-2,800/tonne CFR NE Asia but have been unsuccessful.
BR prices have stayed at an average of $2,600/tonne CFR NE Asia since 28 February, ICIS data showed.
Falling prices of natural rubber (NR) – a substitute product for BR in making tyres – are adding to the woes of BR producers. NR prices have declined by more than $200/tonne since early February.
SMR 20 NR prices were at $2,900/tonne FOB (free on board) Malaysia at the Malaysian Rubber Exchange on 11 March, down from $3,130/tonne FOB Malaysia on 6 February.
Demand for both synthetic rubber and natural rubber is not expected to pick up significantly, given the weak global economic conditions – with Europe still mired in a debt crisis and the US trying to bolster its fragile economy.
“It is going to be a difficult year, given the uncertain global market outlook, and we will adopt a cautious stance,” a tyre maker said.
($1 = €0.77)
Source: icis.com
