Date:Aug 04,2015 Platts

CFR China-FOB Korea butadiene spread turns negative on weak Chinese demand
The location spread between CFR China and FOB Korea butadiene prices sank to a one-year low of minus $30/mt Friday, as the Chinese market spirals down on weak demand, Platts data showed.
The spread was last lower on at minus $35/mt on July 3, 2014. CFR China butadiene price fell $45/mt day on day to be assessed at $955/mt Friday, the lowest level since April 9, 2015, when the price was assessed at $940/mt, while the FOB Korea price was assessed stable on day at $985/mt.

Market sources said China's butadiene market is the weakest in Asia currently, with spot demand dragged down by a quick-falling domestic market.

On Friday, domestic China butadiene price was assessed at Yuan 6,750/mt, or $905/mt on an import parity basis.

Last Friday's price was also the lowest since April 1, 2015, when it was assessed at Yuan 6,700/mt.

Chinese buyers prefer to buy spot butadiene cargoes in the domestic market rather than import as domestic prices are currently lower than imports, market sources said.

"So Chinese buyers do not need to import butadiene cargoes," a trade source said last week.

Trade sources also said Chinese butadiene producers are considering exporting their excess supply in a bid to reduce their high inventories.

On the other hand, the FOB Korea butadiene price is stable, as South Korean butadiene producers have diverted export volumes to domestic sales.

Latest South Korean customs data showed butadiene exports plunged 38% on year to 7,916 mt in June.

Further out, some market sources do not anticipate the location spread to widen further, as they expected some buying to emerge from downstream rubber producers.

Key downstream customer for butadiene is synthetic rubber producers.

"Synthetic rubber producers in China have not purchased butadiene for at least a month, expecting butadiene feedstock market to come down. They need to return to the market to buy spot butadiene soon," a market source said.