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SINGAPORE (ICIS news)--Synthetic rubber producers in Asia are cutting down their operating rates or even considering to extend their plant shutdowns to resist any further spikes in feedstock butadiene costs, industry sources said on Friday.

"We are losing money and will further cut the operating

rates of our plants by another 10-20%," said a company source from [1] Korea Kumho Petrochemical Co (KKPC).

BD spot offers have soared to $1,200/tonne (€852/tonne) CFR (cost and freight) northeast (NE) Asia this week, up a massive $400/tonne from mid-June, when BD hovered around $800/tonne CFR NE Asia.

Dwindling deep-sea supply and the delayed start-up of Fujian Refining and Petrochemical's new 120,000 tonne/year BD plant to mid-August from its initial schedule of July had fuelled the [2]BD price surge.

However, Q3 SBR contracts for non-oil grade 1502 had been settled earlier in May and June at $1,300-1,400/tonne CFR Asia, thus wiping out the margins of SBR producers who need a spread of $400-500/tonne to post any income.

"The current BD price is abnormal and does not reflect market reality. We may also extend our plant shutdowns in October if the BD price continues to go up," the source from KKPC added.

KKPC, the world's largest synthetic rubber producer, is now running an average of 75% for all its synthetic rubber and plastics plants. Its plants were also scheduled to shut down for maintenance in October.

The company runs two styrene butadiene rubber (SBR) plants with a total capacity of 480,000 tonne/year, a 222,000 tonne/year butadiene rubber (BR) plant, a 75,000 tonne/year thermoplastic elastomer (TPE) plant, a 50,000 tonne/year nitrile rubber (NBR) plant as well as a 250,000 tonne/year acrylonitrile-butadiene-styrene (ABS) plant.

Several synthetic rubber producers in China, Taiwan and South Korea have threatened to [3]extend their plant shutdowns and deepen their production cuts due to the relentless BD price surge.

Another Taiwanese synthetic rubber producer, [4]TSRC Corp, has also said it would not accept any further BD price hikes.

"We have already cut our operating rates by 20% and will not be in the spot market for butadiene for August and September," a source at TSRC said.

"We will shut down our BR plant in September for maintenance," he added.

TSRC runs a 100,000 tonne/year SBR plant and a 54,000 tonne/year BR plant at Kaohsiung, Taiwan.

Efforts to hike fresh SBR non-oil spot offers to $1,500-1,600/tonne CFR (cost and freight) Asia in line with the massive spikes in feedstock BD in the past month, have met with limited success as most downstream tyre makes have already covered Q3 requirements until September.

"We are facing strong resistance to any price increase for SBR. The market conditions are now very tough and we will cut out all our B

spot purchases for the next two months," the source from TSRC added.

[5]Shen Hua Chemical Industrial also plans to cut the operating rate of its 180,000 tonne/year SBR plant in Nantong, China by more than 20% in August.

"We are losing money and cannot buy BD higher than $950/tonne. We will shut down our SBR plant in mid-September for a one-month turnaround," said a source from Shen Hua.