After dramatic reduction, Asian butadiene market hopes to see the bottom soon

The Asian butadiene market has been constantly following the downtrend since late August 2018, shrugged off approximately $500/ton in value to reach $1250/ton FOB South Korea as of 10 October. This is the lowest level seen since mid of January this year, according to CommoPlast data.  

The plunge in butadiene cost is a result of slack demand from the downstream ABS and synthetic rubber market, market sources said. Industry experts relate this condition to the fact that the escalated trade war between China and the USA has negatively impacted businesses in the tire and home appliances sectors, which using ABS and synthetic rubber as the main raw materials. 

In fact, speaking to CommoPlast, a home appliance manufacturer in Southern China reported a visible drop in export orders from the USA customers, despite heavy effort has been put in place to mitigate the 25% import duties that newly imposed by the US government. 

“We see 30% reduction in end product orders. At the moment, we are still attempting to look for new export destination and this might require a bit of time,” an electronic home appliances maker said.

Supply for butadiene is still comfortable in Asia, which prompts expectation that further reduction is possible in the near term. Especially when China downstream buyers returned from the National Day holiday showing no rush to make replenishment. 

“We think demand shall slowly come back as local supply in China might tighten a bit in line with the shutdown at Shanghai SECCO and Fujian Refinering & Petrochemical’s plants,” a seller expressed the expectation. 

In the meantime, producers have an opportunity to divert butadiene cargoes to other regions, where demand is better. The challenge here is the logistic, market sources added. “There is a hope that market might be nearing the bottom now,” another seller said.