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TPC explosion may cut exports to oversupplied Asian butadiene market

Singapore — The oversupply condition in the Asian butadiene market is likely to be offset by a possible export cut from the US after a fire hit the TPC Group's Port Neches butadiene and raffinate petrochemical plant east of Houston, Texas, industry sources said Thursday.

The United States is a key butadiene supplier to Asia, mainly to South Korea. According to the United States International Trade Commission, or USITC, the US exported 7,433 mt of butadiene in August, while no exports were registered in September.

Around 5,000 mt of butadiene from the US is due to arrive in Asia in January, said market sources.

"Some end-users in Asia may start looking for spot butadiene cargoes in a bid to cover supply shortfall from the US," a Japanese trader said.

Some market sources said the latest sell tender from Taiwan -- due to close later Thursday -- would likely attract buyers' interests. Taiwan's Formosa is offering around 2,000 mt spot cargo for December loading.

On the other hand, market sources said Asian butadiene market would unlikely see a spike in price as spot butadiene cargoes remains available elsewhere in the region, such as Japan.

Japan's butadiene supplies are currently strong, due to lower synthetic rubber plant operations amid weak margins. Japan's butadiene exports in October stood at 23,433 mt, up 9.1% from a month earlier, according to the customs data. Of the total, exports to Korea rose 11.8% to 18,413 mt during the same period.

UNUSED US CAPACITY

Trading sources in Asia said some end-users in the US are looking for spot butadiene cargoes in Europe after the explosion.

However, some others said that such demand would be short lived, considering unused butadiene capacity in the US. A trader pointed out that the butadiene production in the US is estimated around 1.4 million mt/year in 2019, compared to a total capacity of 2.5 million mt/year.

"As long as other butadiene plants in the US can get crude C-4 supplies, they can increase butadiene production," said a trader, adding that there may be some distribution restrictions on moving crude C-4 in the domestic US market.

Located adjacent to the Sabine Neches River, a part of the Sabine Neches Waterway, TPC's Port Neches plant can produce more than 900 million lb (426,000 mt) of butadiene and raffinate a year, according to the company's website. A source familiar with company's operations said the site has two butadiene lines with capacities of 166,000 mt/year and 260,000 mt/year.

So far on Thursday, the CFR China butadiene price has been hovering at around $885/mt, unchanged from a day before, while CIF USG butadiene price was assessed flat at 22.50 cents/lb Wednesday, or $495.90/mt.

-- Fumiko Dobashi, fumiko.dobashi@spglobal.com

-- Edited by Aastha Agnihotri, newsdesk@spglobal.com