FocusAsia SBR Q3 price hikes face strong resistance

13 May 2009 08:30  [Source: ICIS news]

SINGAPORE (ICIS news)--The negotiations for third quarter (Q3) Asian styrene butadiene rubber (SBR) contracts may drag on longer as downstream tyre producers offer stiff resistance to any price increase, industry sources said on Wednesday.

Major SBR producers had proposed a price hike of $200-300/tonne (€146-219/tonne) to $1,400/tonne CFR (cost and freight) northeast (NE) Asia for the non-oil grade 1502 SBR due to rising feedstock butadiene (BD) costs and strong Chinese demand in the second quarter.

"Feedstock BD costs rose sharply in the second quarter and we had to factor this in into the third quarter contracts as our margins were eroded in the second quarter," a northeast Asian SBR producer said.

BD prices had risen by as much as $200/tonne last month, touching $810/tonne CFR NE Asia in late April, according to global chemical market intelligence service ICIS pricing.

Downstream tyre producers, however, were putting up a tough resistance to the third-quarter contract price hike considering the prevailing weak global automotive industry. SBR is used as a major feedstock in the manufacture of tyres for the automotive industry.

"We do not expect the global automotive sector to recover in the near term. In light of the current difficult market conditions we are seeking a rollover for the third quarter contracts," a downstream tyre maker said.

The second quarter non-oil grade 1502 contracts were largely settled at $1,100-1,200/tonne CFR Asia.

The continued slump in the global automotive sector had affected tyre producers' business, with major tyre makers such as Goodyear, Michelin, Bridgestone and Continental shutting down production lines as vehicle sales in Europe and the US continued to plunge.

Top Japanese auto-maker Toyota Motor Corp was also badly hit, recording a net loss of  $7.7bn in the first quarter, its worst fiscal year since it was founded in 1937. The losses were also bigger than the $6bn loss announced by major US auto-maker General Motors.

In contrast to the economic downturn in Europe and the US, China's vehicle sales hit a record monthly high of 1.15m units in April, up 25% year on year, according to the China Association of Automobile Manufacturers (CAAM).

($1 = €0.73)

For more on styrene butadiene rubber visit ICIS chemical intelligence
To discuss issues facing the chemical industry go to ICIS connect

By: Helen Yan
+65 6780 4359

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