FocusAsia SBR makers eye Q4 price hike on Chinese demand

25 August 2010 06:47  [Source: ICIS news]

By Helen Yan

SINGAPORE (ICIS)--Asian styrene butadiene rubber (SBR) producers plan to increase their prices for the fourth quarter on the back of a rise in Chinese demand, industry sources said on Wednesday.

“We will raise our offers for SBR non-oil grade 1502 up by $100/tonne (€79/tonne) to $2,150-2,200/tonne for October and November shipments, but the offers may be revised further upwards, depending on [demand in] China,” a northeast Asian SBR producer said.

China's demand for SBR imports has emerged in recent weeks, with SBR non-oil grade 1502 prices rising $100/tonne since July to $2,000-2,050/tonne CIF (cost, freight and insurance) China by the middle of August, lifted by the upward price momentum in the Chinese domestic market, according to ICIS. (please see graph below)

Since late July, Chinese domestic SBR non-oil grade 1502 prices had surged by more than yuan (CNY) 2,000/tonne ($294/tonne) to CNY 17,200-17,400/tonne ex-warehouse (EXWH) this week, ICIS data has shown.

Even though the upsurge in Chinese domestic SBR prices was initially driven by speculative trades, major SBR producers were expecting demand from the downstream tyre producers to pick up as they had to replenish their dwindling inventories.

“Many tyre makers in China had cut operating rates in the third quarter, so they have to start building up inventories now,” a Chinese SBR producer said.

“We anticipate demand from tyre producers in China to improve from September and to remain strong into the fourth quarter, as we expect automobile sales to pick up in China in the fourth quarter, after slowing down in July,” he added.

A total of 946,200 automobiles were sold in July, up 13.6 per cent year-on-year, but down by 9.3 per cent from a month earlier, according to the China Association of Automobile Manufacturers (CAAM).

This marked the slowest rate of increase of automobile sales in China in 15 months, according to CAAM data.

According to industry sources, automobile sales in China usually pick up towards the end of the year, as car dealers and automakers launch promotion campaigns to boost sales ahead of the Lunar New Year.

The Lunar New Year usually tends to fall in January or February every year and the Chinese usually ring in the Lunar New Year by replacing their old material possessions with new items, including clothes, furnishings and cars.

Meanwhile, some downstream tyre producers said that it was too early to say that demand for automobiles would pick up in the fourth quarter.

“There are no clear signs that auto sales will improve in the fourth quarter and that tyre production will increase during this period,” a major tyre producer said.

Nonetheless, SBR producers were confident that they would achieve their price hikes in the fourth quarter, given that feedstock butadiene (BD) had bottomed out at $1,600-1,650/tonne CFR Asia and was expected to rebound soon.

BD is a major feedstock in the production of SBR and a spread of about $400/tonne is required for SBR producers to post any margins.

“We expect feedstock BD prices to rebound soon and this will further boost our case for a price hike in the fourth quarter,” a SBR producer said.

Major SBR producers in Asia include Korea Kumho Petrochemical Co (KKPC), LG Chem and Shen Hua Chemicals.

Major tyre producers include Goodyear, Bridgestone, Michelin, Kumho Tires and Toyo Tires.

($1 = €0.79/ $1 = CNY6.80)

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Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By: Helen Yan
+65 6780 4359

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