Asian butadiene's CFR China-FOB Korea spread at 3-year low amid bullish US demand

The spread between CFR China and FOB Korea butadiene prices stood at a 37-month low of minus $60/mt June 28 amid bullish demand from the US for FOB Korea cargoes.

The CFR China butadiene price was unchanged from the previous session at $1,310/mt June 28 and the FOB Korea price unchanged at $1,370/mt. S&P Global Platts data showed, holding on to gains from the previous session, when a $20/mt day-on-day rise in the CFR China price was outpaced by a $90/mt surge in the FOB Korea price on June 25.

The FOB Korea butadiene price is typically around $50/mt lower than the CFR China price, based on South Korea-China freight costs, but is currently being boosted by demand from the US due to lower plant operations.

Traders are actively looking for spot butadiene cargoes in South Korea for the US market. The CIF USG butadiene price rose 12 cents/lb week on week to be assessed at 87 cents/lb or $1,917/mt June 25, the highest level since April 2017, Platts data showed.

Trading sources said around 20,000 mt of butadiene has been fixed from South Korea to the US for June and July loading.

Supply tightens in South Korea

The FOB Korea price was also being boosted by supply tightness amid domestic plant hiccups, market sources said.

South Korea's Lotte has delayed the restart of its 150,000 mt/year butadiene plant in Daesan due to technical issues at its upstream steam cracker, Platts reported earlier. The cracker, which was restarted June 19 after annual maintenance that began May 15, was still unable to produce on-spec crude C-4, and the company now plans to restart the butadiene plant around June 29.

Two recently started-up steam crackers in South Korea were also facing challenges.

LG Chem was struggling to raise the operating rate of its new naphtha-fed steam cracker in Yeosu to 100%, which was started up around June 11, while GS Caltex on June 27 shut its new mixed-feed cracker at Yeosu that was started up in mid-June due to a technical issue, Platts reported earlier.

On the other hand, China's import demand was rather limited as domestic supply was seen to be sufficient following a series of startups of new butadiene plants. The domestic butadiene price was hovering around Yuan 9,400/mt, equating to $1,260/mt on an import parity basis, lower than the current CFR China price, according to Platts data.

Market sources said the surge in FOB Korea prices was expected to moderate soon as US end-users were turning cautious due to the high prices, with some preferring to buy spot cargoes on a contract price-based formula basis rather than fixed price in an effort to minimize risks in a volatile market.