Dim forecast for BD prices as oil decline, low demand continue

London – Falling crude and naphtha prices, low demand and weak macroeconomic conditions are contributing to a decline in butadiene (BD) prices in Asia and elsewhere in the world, according to market analysts.

Used as the raw material for styrene butadiene rubber (SBR) and polybutadiene rubber (PBR) in the tire industry, BD is going through a “rough patch” in Asia as well as other parts of the world.

Chinese as well as global demand for both SBR and PBR have slowed down, and in the light of 50-percent drop in crude oil prices, the market is expected to continue to experience a downward trend.

On 9 Jan, spot butadiene (BD) prices in Asia fell to an average of $825/tonne CFR (cost and freight) northeast (NE) Asia, down by 17% compared to prices from 26 December, according to the data gathered by pricing intelligence firm ICIS.

Also, Global Rubber Market, citing figures from companies including ExxonMobil, Shell Chemicals and LyondellBasell, reported that January US butadiene contract prices were nominated 3-6 cents/lb ($66-$132/mt) lower than December settlements.

India’s heavyweight Reliance Industries Ltd, also cited the low BD prices as part of its poor Q4 results.

“Sharp declines in crude oil prices, continued soft demand for synthetic rubber and new butadiene capacities led to prices for the monomer “touching a new low in FY15,” the Indian petrochemicals group said in a performance review for its elastomers business.

In addition to market players such as crude and naphtha, the price declines were also accentuated by “high operating rates at naphtha crackers, which ensured abundant availability of butadiene feedstock,” said the Reliance business report.

In the wake of low demand, a number SBR and PBR producers in Asia have reduced their production because of weak market conditions, said the ICIS report.

The outlook is not too bright for BD either as crude and naphtha prices are likely to drop even lower.