FocusGlobal SBR prices set to decline for third consecutive month

01 November 2011 13:57  [Source: ICIS news]

LONDON (ICIS)--Global styrene butadiene rubber (SBR) contract prices are set to decline for a third consecutive month because of falling feedstock butadiene (BD) costs, weak demand and ample supply, market players said this week.

In Europe, the cost of BD went from €1,340/tonne ($1,861/tonne) free delivered (FD) northwest Europe (NWE) in January to €2,525/tonne in August, an increase of €1,185/tonne. But since then, however, it has fallen to €1,850/tonne, a decrease of €675/tonne.

Earlier in the year, when BD supply was tight and demand was high, the price of SBR shot up to record highs from €1,900–2,100/tonne in January to €3,100–3,350/tonne in August.

The feedstock tightness has now gone because of declining demand in domestic and export markets, which has driven down the prices of all SBR grades. Since August, the cost of 1500 grade SBR has declined by €350–450/tonne to reach €2,750–2,900/tonne in October.

The November price is expected to fall by another €200–250/tonne following a €250/tonne feedstock cost decrease.

Similarly, the price of 1723 grade SBR has declined in the past two months from August’s high of €2,920–3,120/tonne to €2,600–2,700/tonne in October, a drop of €320–420/tonne.

The price of 1783 grade SBR has fallen from €2,870–3,070/tonne in August to €2,650–2,750/tonne in October, a decline of €220–320/tonne.

The price of 1723 and 1783 grade SBR is less affected by the movements of feedstock BD because they contain less of it, but spot prices indicate another €50–100/tonne drop in November.

“Demand is going to be slowing now as most buyers have begun to destock early [normally, destocking starts at the end of November]. I think demand will only pick up at the beginning of next year when the new season starts,” said a European tyre-buyer.

Demand for SBR has slumped because major tyre makers in Asia have been keeping lean inventories and cutting production output amid concerns over a global recession, industry sources said.

In Asia, the price of non-oil grade 1502 SBR has dropped by more than 30% since August, reaching $3,000–3,100/tonne CFR (cost & freight) India by 26 October.

On a cost, insurance and freight (CIF) China basis, prices also fell by the same magnitude to $3,100-3,200/tonne, over the same period.

SBR prices were largely tracking the feedstock BD declines, which plummeted below $2,000/tonne last week, down from $4,300/tonne in July.

“There is no confidence in the global auto-market recovery in the near term, given the ongoing European debt crisis and slowing economies in the US and Asia,” a trader said.

In the US, SBR prices have followed BD prices in a downward slide, although not as dramatically. US BD November contracts settled at a drop of 25 cents/lb ($551/tonne), down to 115 cents/lb from the October contract range. This is the first single settlement in eight months.

In the past 12 months BD contract prices peaked at 170–175 cents/lb FOB (free on board) USG (US Gulf) in July 2011, while the low contract prices were recorded in November 2010, when it was 84 cents/lb.

Spot prices for BD in the past 12 months peaked at 217.5 cents/lb in July. The low point was in November 2010, when it dipped to 77.50 cents/lb.

Non-oil grade 1502 SBR contract prices are at 183–190 cents/lb, although it is possible those rates will decrease. The high for 1502 in the past year was in August, at 190 cents/lb. The low contract price in the past 12 months was in November 2010, when it fell to 107 cents/lb.

Spot prices for 1502 hit a high in June 2011 at 230–245 cents/lb, while the low was at 107 cents/lb in December 2010.

Spot prices for oil-extended 1712 SBR are at 150–160 cents/lb. The high for the past 12 months was July 2011, when it was in the 205–220 cents/lb range, while the low was 97–101 cents/1b in November 2010.

Current contract prices for 1712 are at 161–169 cents/lb, the joint-highest in the past year, and these, too, may decrease soon. The low was in November 2010 at 97–104 cents/lb.

SBR is used in the production of tyres for the automotive industry and Asia is a production centre for global tyre producers such as Bridgestone, Continental, Goodyear and Michelin.

($1 = 0.72)

By Helen Yan, Janos Gal, Wesley Busch

By: Janos Gal
+44 208 652 3214

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