Asian butadiene slumps to 5-month low suffering from US-China trade war

Asian butadiene prices slumped to a five-month low Wednesday, as it got caught in the ripple of the US-China trade war after downstream acrylonitrile butadiene styrene and synthetic rubber suffered.

Platts FOB Korea butadiene marker tumbled 45% from its 2018 peak of $1,930/mt which it hit on May 17, to $1,060/mt Wednesday, the year-to-date low. Platts CFR China butadiene slumped 37.6% during the same period to $1,050/mt Wednesday.

Market sources attributed the tumble in butadiene prices to ABS producers' weak to negative margins as well as falling synthetic rubber prices, despite the latter's better performance.

"While it is true that SBR takes up the biggest volume, ABS has always been the one that can support the prices," an Asian butadiene producer said.

ABS prices have also tumbled to a year-to-date low. Platts assessed ABS CFR China at $1,670/mt and CFR Southeast Asia at $1,720/mt Wednesday, down 21% and 19% from their respective peaks on February 28.

ABS margins have been suffering for the past few months, with the September margins averaging minus $26.41/mt, after taking into account costs of the three feedstocks styrene monomer, acrylonitrile and butadiene, according to calculations by Platts.

While high raw material prices have been blamed for ABS' weak performance, another large contributing factor is the poor performance from the downstream consumer electronics sector.

This was due to reduced export demand following trade tariffs of 25% imposed on Chinese consumer electronics products by the US, in light of the ongoing trade tensions.

The US has implemented three rounds of trade tariffs on Chinese goods this year, with a fourth round still under consideration. The latest round for US tariffs on Chinese products took effect September 24.

The list targets a wide range of machinery, electronics and mechanical products and could amount up to $200 billion in goods.

Total Chinese exports to the US grew only 5.4% in H1, which is 13.9% lower year on year, National Bureau of Statistics of China data showed.

Meanwhile, market sources noted that synthetic rubber makers have been making healthier margins as compared with ABS makers in the recent month, prices for the former have also come down in the two months, with Platts emulsion styrene butadiene rubber (ESBR) prices tumbling 17.6% in mid-August to $1,545/mt CFR Southeast Asia Friday.

Synthetic rubber makers earlier expressed concern over the trade tensions, with downstream tyre exports expected to suffer.

According to figures from the US Department of Commerce, China was the largest trading partner of the US for tires in 2017, with the value of its tire exports at $1.95 billion in that year.

It was the top source of truck or bus tires for the US in 2017, exporting 6.5 million tires, making up 44% of such imports.

"We will definitely be hit; we are just not certain by how much," one Chinese synthetic rubber maker said.

For upstream butadiene, market sources also noted that prices began to decline most aggressively after September, when the latest round of US-China trade tariffs were implemented.

"The real effect (of the US-China trade war) came in September," one producer said, adding that his customers had been asking when prices would bottom.