FocusJAPAN DISASTER: SBR prices to fall on Japan’s woes

16 March 2011 05:35  [Source: ICIS news]

By Helen Yan

SINGAPORE (ICIS)--Asian styrene butadiene rubber (SBR) prices are expected to fall in the short term, as major Japanese car makers have suspended production at their local plants in the wake of the devastating earthquake, industry sources said on Wednesday.

Car makers including Toyota, Honda, Nissan, Suzuki and Mitsubishi have halted production at their plants on the back of safety concerns and power outages in the country following the 9.0-magnitude earthquake that hit Japan on 11 March.

SBR is a major raw material used in the production of tyres for the automotive industry.

“Synthetic rubber prices may be under pressure to fall in the short term, but it will only be temporary before prices pick up again as demand will pick up in the long term,” said a Japanese synthetic rubber producer.

However, tyre producers in Asia are pressing for lower second-quarter (Q2) SBR contract prices in light of the stoppage of car production in Japan and the 30% drop in natural rubber prices.

Bids for non-oil grade 1502 SBR Q2 contracts were at $3,000–3,300/tonne (€2,130–2,343/tonne) CFR (cost & freight) Asia, against offers that were at $3,800–4,000/tonne CFR Asia, said the tyre makers.

“We will not pay higher than $3,300/tonne for non-oil grade 1502 SBR, as our margins have been wiped out by the high raw material costs,” said an Indian tyre producer.

Natural rubber and SBR are substitutes for each other in the production of tyres for the automotive industry and their prices tend to have an impact and move in tandem with each other.

Meanwhile, several Asian synthetic rubber producers have withdrawn their Q2 contract offers, while others held them stable this week.

“We have no offers this week and will wait for a clearer picture before making any firm offers,” said a major Korean synthetic rubber producer. 

Tyre producers in Asia said that SBR producers should reduce their Q2 contract prices, in line with the sharp fall in natural rubber prices.

“We will switch to natural rubber if the SBR producers do not adjust their Q2 SBR contract prices downwards, in line with the falls in natural rubber prices,” said a tyre producer in India.

TSR 20-grade natural rubber prices for May delivery have dropped by 30% since mid-February to around $4,000/tonne on Wednesday at the Singapore Commodity Exchange.

However, a northeast Asia-based SBR producer said that if there is to be any revision in Q2 contract prices, it would not be immediate.

“The price adjustment, if any, will be on a gradual basis and we will not go lower than $3,750/tonne CFR Asia for non-oil grade 1502 SBR,” said the producer.

($1 = €0.71)

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



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