Tyre makers resist SBR Q2 contract price hike

21 February 2008 04:21  [Source: ICIS news]

By Helen Yan

SINGAPORE (ICIS news)--Major tyre producers said on Thursday they were resisting proposed second-quarter contract hikes for non-oil grade 1502 styrene butadiene rubber (SBR) as the increase was too steep.

Contract hikes of 25% or about $500/tonne (€340/tonne) to $2,500/tonne CFR (cost and freight) Asia have been proposed.

“This is unbelievable and not acceptable at all. There is no way we can consider this hefty contract price hike of more than $500/tonne for second quarter contract settlement,” a source at a major Japanese tyre producer said.

Major Korean SBR producers, Korea Kumho Petrochemical Co (KKPC) and LG Chemicals, have justified the $500/tonne increase for second quarter non-oil grade 1502 contracts on strong demand, tight supply and high butadiene (BD) feedstock costs.

 “The butadiene feedstock price has been rising sharply every month since last year and we have to factor this high BD cost as well as strong demand and tight SBR supply into the second quarter contract offers,” a SBR producer said.

BD spot prices hit a record high of $1,900/tonne CFR northeast (NE) Asia in early February, up about $600/tonne since last November, according to global chemicals market intelligence service, ICIS pricing.

“Although tyre producers have increased the tyre prices to cope with the rising SBR costs, it is not possible to absorb another $500/tonne hike and to continue to pass on the costs to our customers, a tyre producer said.

“A more modest increase of $200/tonne would be more in line with the BD price increase,” he added.

In recent weeks, several major tyre major producers in the US have announced tyre price increases of 5-7% for cars, saying the price increases were primarily driven by the rising SBR prices.

These include Continental Tire North America, Cooper Tire and Rubber, Goodyear Tire &Rubber, Kumho Tire USA, and Michelin North America.

Japan’s top tyre maker, Bridgestone Corp, also said it will raise prices in China by 3- 5% beginning in March because a cost-cutting initiative failed to offset rising raw material costs.

Nymex crude oil futures have hit $101/bbl while natural rubber prices have risen by about $250/tonne in the past month to $2,750/tonne.

Natural rubber and SBR prices tend to move in tandem with each other as they are interdependent substitutes.

First quarter non-oil grade 1502 contracts were settled at $1,950-2,000/tonne CFR Asia.

($1 = €0.68)

By: Helen Yan
+65 6780 4359

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