Europe March SBR contracts up €200-300/tonne on supply, demand

02 March 2011 23:59  [Source: ICIS news]

LONDON (ICIS)--European styrene butadiene rubber (SBR) March contract prices settled at increases of €200-300/tonne because of strong demand, tight supply and rising upstream costs, buyers and sellers said on Wednesday.

Some players said that market availability was the lowest it had ever been.

“The market is tighter than I’ve seen before in 16 years in the market,” one SBR producer said.

The 1500 grade March contracts settled at an increase of €250/tonne ($342/tonne), at €2,450-2,550/tonne; 1723 grade March prices rose by €300/tonne to €2,300-2,400/tonne, and 1783 grade March prices rose by €300/tonne to €2,250-2,350/tonne, according to ICIS.

All prices were settled on a free delivered (FD) northwest Europe (NWE) basis.  

The tight supply was the result of strong demand, feedstock butadiene (BD) shortages and lower imports from eastern Europe because of strong domestic demand in the region, sources said.

There was also talk of production problems at a producer in northwest Europe, which players said was further tightening the market, but this could not be confirmed at source.

Strong demand continued to be driven by exports to Asia. Large quantities of finished tyres were being shipped to Asia because GDP growth and upward social mobility in China were fuelling demand.

“There are a lot of exports, the strong demand is all because of Asia,” a buyer said

SBR was being used as an alternative to natural rubber in Asia because of the limited availability and high prices of the latter. SBR is commonly substituted for natural rubber in Asia. However, technical restrictions on European tyre production limit substitution options to around 5% of applications.

Margins on product sold to Asia remained at €300-400/tonne above material sold in to Europe, exporters said. This meant that all spare volumes were being shipped to Asia.

European players that could still source spot material reported prices broadly in line with March contract levels, with the exception of 1500 grade, which was in line with March contracts at the bottom end, but trading at up to €2,600/tonne at the top end.

There were concerns over the sustainability of Asian demand, but most players were predicting high consumption to last at least through the second quarter, although predictions beyond this could not be made.

“We’re trying to understand what exactly is happening and the sustainability... the growth for tyres has been Asia, but is it sustainable?” a producer said.

The feedstock March European butadiene contract price settled at €1,555/tonne, up €115/tonne from February, as a result of strong demand and upstream volatility, market sources said on Tuesday.

($1 = €0.73)

Additional reporting by Nel Weddle

For more on SBR visit ICIS chemical intelligence

By: Mark Victory
+44 208 652 3214

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