FocusAsia SBR makers opt for spot sales as feedstock costs surge

15 June 2009 06:30  [Source: ICIS news]

By Helen Yan

SINGAPORE (ICIS news)--The Asian styrene butadiene rubber (SBR) market would see more monthly spot sales from July as producers cut back on third quarter (Q3) contract volumes amid escalating costs of crude and feedstock butadiene (BD), industry sources said on Monday.

SBR producers said they had been caught off guard by the rapid rise in prices of feedstock BD in the second quarter which had eroded their margins. This should not happen again in the July-to-September period, they added.

SBR is used in the production of tyres for the automotive industry.

“Customers tend to have the upper hand in quarterly contract negotiations as they have the option to delay the monthly shipments or to renegotiate Q3 contract prices when feedstock costs drop,” an SBR producer said.

“However, when feedstock costs rise rapidly, it is more difficult to renegotiate the quarterly contracts. Synthetic rubber makers have been caught out this year and we wish to pre-empt this in the third quarter,” he added.

Crude peaked at $73/bbl (€51.8/tonne) and naphtha breached the $600/tonne CFR (cost and freight) Japan level last week, pushing up the cost of BD, which is a major raw material used to manufacture SBR.

Spot prices of BD rose by $50-60/tonne to $750-780/tonne CFR northeast (NE) Asia last week, according to global chemicals markets intelligence service ICIS pricing. The prices jumped about 29% between early April and mid-June.

Market players said BD could continue to spiral upwards and breach the $800/tonne CFR NE Asia level in the coming weeks.

“We will cut down the Q3 synthetic rubber contract volumes and instead increase our monthly spot sales from July as we anticipate that the feedstock BD costs may continue to rise further to more than $800/tonne CFR NE Asia,” a Korean SBR producer said.

Another Southeast SBR producer echoed the same sentiment, saying that it will also reduce its Q3 contract volumes and sell more on a monthly spot basis in particular to the smaller customers due to the spikes in the feedstock BD costs.

“For long-term large customers, we will still settle on a quarterly basis. But for other customers, it will be only on a spot basis from July as we anticipate that BD costs might continue to spiral upwards,” the southeast Asian SBR producer said.

Offers for non-oil grade 1502 SBR have been revised up to $1,450-1,500/tonne CFR Asia for those who have yet to settle their third quarter contracts. Some downstream tyre producers have earlier settled Q3 non-oil grade 1502 SBR contracts at $1,350/tonne CFR Asia, up $100-200/tonne from the previous quarter.

Major SBR producers include Korea Kumho Petrochemical Co (KKPC), LG Chem, JSR Corp, TSRC Corp and Bangkok Synthetic Elastomers (BSTE).

Major downstream tyre makers include Goodyear, Bridgestone, Michelin, Hankook Tires, and Continental.

($1 = €0.71)

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By: Helen Yan
+65 6780 4359

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