Asia SBR Q4 contracts may be re-negotiated

30 October 2008 03:05  [Source: ICIS news]

SINGAPORE (ICIS news)--Asia styrene butadiene rubber (SBR) producers face mounting pressure to re-negotiate their fourth-quarter contracts as buyers have defaulted and cancelled deals amid falling consumer demand and plunging feedstock butadiene (BD) and styrene monomer (SM) prices, market sources said on Thursday.

 

Buyers were seeking a hefty discount of more than $500/tonne for the fourth-quarter contracts.

 

Fourth-quarter contracts for non-oil grade 1502 were settled earlier in September at $3,250-3,400/tonne CFR (cost and freight) Asia.

 

“These are extenuating circumstances and we have no choice but to ask for a substantial discount, given the sharp drop in feedstock prices and falling consumer demand,” a downstream tyre producer said.

 

BD has plummeted to $1,200/tonne CFR Asia, down a whopping $1,500/tonne in the past month and SM has plunged below $550/tonne, down more than $800/tonne since September.

 

The sharp price decline in natural rubber has also added to the downward price pressure. Natural rubber has tumbled to around $1.70/kg, down from more than $2.90/kg in early September.

 

Natural rubber is a substitute for SBR and several downstream tyre producers have switched to natural rubber.

 

The global credit crisis and recession fears have exacerbated the situation as tyre producers have been hard hit by slowing global demand.

 

Automobile sales have been falling and several downstream tyre producers including Cooper Tire & Rubber and Michelin North America have announced plans to cut production.

 

Korean tyre producer, Kumho Tire, has delayed the start-up of its new $240 million tyre plant in the US due to the weak market conditions. The new plant was originally scheduled to be completed in December 2009. It is not known how long it will be delayed.

 

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By: Helen Yan
+65 6780 4359

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