07 September 2010 09:05 [Source: ICIS news]
By Helen Yan
SINGAPORE (ICIS)--Asian styrene butadiene rubber (SBR) prices are poised for another increase as major producers revise their offers upwards, fuelled by a surge in the Chinese domestic market, industry sources said on Tuesday.
The uptrend was likely to continue into the fourth quarter, they added.
Spot offers for SBR non-oil grade 1502 have been hiked to $2,250-2,300/tonne (€1,755-1,794/tonne) CFR (cost and freight) Asia, up by $50-100/tonne from previous offers, according to ICIS.
SBR non-oil grade 1502 prices in Asia have increased by about $200/tonne since early August, ICIS data has shown.
“Demand is picking up and prices have to be revised up to reflect the change in demand,” a major SBR producer said.
The upward price revision tracks the soaring Chinese domestic prices which surged to yuan (CNY) 18,500/tonne ($2,725/tonne) ex-works this week, up CNY500/tonne from the previous week.
Chinese domestic SBR non-oil grade 1502 prices have increased by CNY 3,000/tonne since late July, when domestic non-oil grade 1502 prices hovered around CNY 15,500/tonne ex-works (EXWH).
The SBR upward price trajectory was due to rising Chinese demand as traders and end-users replenished and built up stocks ahead of the upcoming holidays, industry sources said.
“Market players are closely watching the Chinese market as any sustained price hikes in the Chinese domestic market will prompt the Asian SBR producers to hike prices elsewhere in Asia,” a downstream tyre producer said.
Other than the robust Chinese domestic market, soaring natural rubber prices and anticipated tightening in SBR supply in October, had bolstered the upward price trend.
TSR 20 natural rubber prices had soared to more than $3,300/tonne, up nearly $300/tonne since early August. TSR 20 natural rubber is a substitute for synthetic rubber and both the prices tend to move in tandem with each other.
SBR supply is also anticipated to tighten in October as Asia’s largest synthetic rubber producer, Korea Kumho Petrochemical Co (KKPC), is scheduled for a 10-15 day turnaround in early October.
KKPC is scheduled to shut its 480,000 tonne/year SBR plant, 222,000 tonne/year butadiene rubber (SBR) plant and 80,000 tonne/year nitrile rubber (NBR) plant in early October.
However, the downstream tyre producers, the largest consumer of SBR, said that another SBR price hike was not sustainable, given that the fundamental demand was not strong enough to support another price increase.
“We are facing increasing costs pressures as there is still a lot of uncertainty about demand growth in the fourth quarter.
Nonetheless, Asian SBR producers are likely to sustain the Q4 price uptrend in a bid to recover margins lost in the third quarter.
Margins were lost in the third quarter due to escalating feedstock butadiene (BD) costs, according to market players.
Export trades to Europe and the US have not recovered due to the economic downturn in these regions and our margins are being continually squeezed by rising production costs,” a major downstream tyre producer said.
Several major tyre producers use Asia as a production facility to manufacture tyres for the export markets.
($1 = €0.78 / $1 = CNY6.79)
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