SBR makers post offers on weekly basis on feedstock BD surge

19 August 2009 04:52  [Source: ICIS news]

By Helen Yan

SINGAPORE (ICIS news)--Asia styrene butadiene rubber (SBR) producers will post their offers weekly instead of on a monthly basis due to the unabated spikes in the feedstock butadiene (BD) cost, SBR makers said on Wednesday.

“We have no choice but to continuously revise our SBR offers due to the feedstock BD cost which keeps going up every week,” a Korean SBR producer said.

“We will post our SBR offers on a weekly basis as we have to factor the feedstock BD price hikes into the SBR price or we will have no margins,” he added.

The continued surge in the feedstock BD price has stymied the monthly SBR price discussions. Some SBR producers were already forced to revise their offers on a weekly basis since early-August to keep up with the sizzling pace of BD price spikes.

Asia SBR producers have been hard hit by the relentless BD price surge, which had wiped out their margins.

A major synthetic rubber producer, Korea Kumho Petrochemical Co (KKPC), had to idle its new and smaller 110,000 tonne/year styrene butadiene rubber (SBR) plant for four months until October due to the erosion in margins from escalating feedstock BD cost, company sources said.

The BD spot price is now more costly than the third-quarter (Q3) non-oil grade 1502 SBR contracts settled earlier in June and July at $1,300-1,500/tonne (€923-1065/tonne) CFR Asia.

BD spot prices skyrocketed to $1,450-1,500/tonne CFR (cost and freight) northeast (NE) Asia last week, up $450/tonne from mid-July, according to global chemicals market intelligence service, ICIS pricing.

BD spot prices have doubled since early June when prices hovered around $700/tonne CFR NE Asia.

The feedstock BD spot offer has further increased to $1,550-1,600/tonne CFR NE Asia this week, and the upsurge seems likely to continue, given its tighter-than-expected supply in China.

Market sources said the unexpected two-month delay in Fujian Refining and Petrochemical Co's new 120,000 tonne/year BD unit from July to September, as well as dwindling supply from the arbitrage trades to the US Gulf had fuelled the BD price spikes.

In light of the relentless BD price spikes, SBR producers hiked non-oil grade 1502 offers to $2,000-2,100/tonne CFR Asia this week for August prompt shipments, up $200/tonne from the previous week.

SBR producers require a spread of $400-500/tonne between BD and non-oil grade 1502 in order to post any margins.

A Southeast Asian SBR producer said it had stopped making spot offers for September shipments and would revise its offers again in September, depending on the BD price.

“We might as well sell the raw material BD, given its higher price and margin compared with SBR,” a Japanese SBR producer said tongue-in-cheek.

($1 =  €0.71)

For more on styrene butadiene rubber (SBR) visit ICIS chemical intelligence
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By: Helen Yan
+65 6780 4359

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