Asia BD spirals down on swollen inventories, soft demand

Asia butadiene (BD) spot prices still have room to fall in 
April because of swollen inventories at ports in China and dwindling demand.

Asia spot prices continued to spiral down to $1,800/tonne CFR (cost and freight) northeast (NE) Asia on 24 March, down by 40% since early February when it hit $3,000/tonne CFR NE Asia, ICIS data showed. The Asia BD downward price spiral tracked the plummeting Chinese domestic BD price.

Chinese domestic BD prices had plummeted by about yuan (CNY)13,000/tonne since early February to CNY12,900-13,200/tonne delivered in east China on 27 March, according to the ICIS data. Spot appetite from Chinese buyers for BD imports has evaporated in view of the bloated inventories in ports in China.

“The tanks in China are full, there is no room for any more spot cargo,” a trader said. And the slowing downstream rubber sales also harmed the buying interest for BD, sources said. “Our downstream rubber inventory remained high, and nobody wants to purchase due to the falling feedstock prices,” a local rubber maker said.

Surging imports

China’s BD import in February surged to a 15-month high of 31,341 tonnes, more than double the volume recorded in the same period last year, official data showed. Although the Chinese market was closed for the Lunar New Year holiday on 27 January to 2 February, China’s BD imports in the first two months of the year stood at an all-time high, a market source said.

"There is too much BD supply in April in Asia, with about 40,000 tonnes of regional and deep-sea cargoes arriving in China in March and April, so it may take another month to clear the inventories before spot appetite will return in Asia,” an end-user said.

A northeast Asian BD producer said there were no enquiries from China buyers. “The market is very quiet.”

Other than the Chinese buyers, end-users in Taiwan and South Korea, had also retreated to the sidelines in anticipation of lower prices.

“There are few enquiries and buyers are still in a wait-and-see mode as they expect BD prices to still fall lower,” a trader said.

In light of the continued weakness in the Asia BD market and expectations that prices may still fall lower, there is talk that this will open up the arbitrage window to Europe. Prior to the arbitrage window opening to Europe, Asian suppliers had exported about 13,000 tonnes of BD to US in March.

However, the arbitrage window to the US has closed as the contract price nominations for April have come in at decreases of 12 cents/lb and 17 cents/lb from March. On the other hand, Europe’s April contract price rolled over at €1,750/tonne FD (free delivered) NWE (northwest Europe).

“Asia BD prices have to fall below $1,500/tonne CFR NE Asia for the arbitrage window to Europe to open up,” a trader said.