FocusIndia SBR prices may fall in Q4 on feedstock declines

18 October 2011 05:06  [Source: ICIS news]

By Helen Yan

SBR is used in the production of vehicle tyres.SINGAPORE (ICIS)--Prices of styrene butadiene rubber (SBR) in India are set to weaken further in the fourth quarter as feedstock butadiene (BD) prices tumble and car sales fall, industry sources said on Tuesday.

Prices of non-oil grade 1502 SBR have plummeted by $700/tonne (€511/tonne) since mid-September to $3,400-3,500/tonne CFR (cost & freight) India in the week ended 12 October, ICIS data showed.

This is in line with the more than a $800/tonne drop in feedstock BD prices to $2,300-2,400/tonne CFR NE (northeast) Asia during the same period.

Market players expect prices of SBR 1502 to fall further to around the $3,000/tonne level.

“We anticipate that prices of SBR 1502 will touch the $2,600-2,700/tonne level in November. Demand is not picking up as major tyre companies in India are cutting down production by at about 20% due to overcapacity,” an Indian tyre maker said.

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

“My customers in India are buying smaller SBR lots on a more frequent basis and keep asking for lower prices every week. Prices are dropping by at least $100/tonne every week,” a SBR trader said.

India’s automotive industry, which saw an impressive double-digit growth in domestic passenger car sales of 30% in the last fiscal year and 25% in the year before, has been hit by a spate of problems this year.

Rising interest rates, higher fuel prices and labour unrest at leading Indian car producer Maruti Suzuki have eroded consumer confidence and taken a toll on the automotive industry.

Passenger car sales in India are forecast to grow by just 2-4% in the fiscal year ending March 2012 – down sharply from earlier forecasts of 10-12% by the Society of Indian Automobile Manufacturers (SIAM) in July.

India’s car sales slid by 1.8% to 165,925 units in September this year, falling for the third month in a row.

September’s decline follows a 10% fall in August and a substantial 16% drop in July – the biggest drop since November 2009 and the first decrease since January 2009, according to SIAM.

“Car sales will still come down in the fourth quarter. The weakening of the Indian rupee has led to an increase in gasoline prices in India and many of my friends have shifted to car pooling or public transport as it is cheaper and faster. We will see this trend to continue till the end of December,” an Indian end-user said.

($1 = €0.73)

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By: Helen Yan
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