FocusAsia SBR to extend gains on strong BD pull, demand looks weak

08 December 2011 04:06  [Source: ICIS news]

By Helen Yan

SINGAPORE (ICIS)--Styrene butadiene rubber (SBR) prices in Asia are set to rise further through January on the back of soaring values of feedstock butadiene (BD), but weak demand will likely temper the price uptrend, industry sources said on Thursday.

Offers this week for non-oil grade 1502 SBR have increased to $3,000-3,100/tonne (€2,250-2,325/tonne) CFR (cost and freight) southeast (SE) Asia for fresh January and February 2012 shipments, up by $200-300/tonne from December cargoes, they said.

Spot prices started to rally in late November after slumping 40% from early August, ICIS data showed.

“The main driver for the SBR price rebound is increasing feedstock BD costs, rather than demand. We are not optimistic about the first quarter of 2012 as there are concerns over a global slowdown next year,” said a major tyre maker based in China.

BD prices rose to $2,100-2,150/tonne CFR NE Asia in the week ended 2 December, up by 35% from early November, according to ICIS.

BD is a major raw material in the production of SBR, making up more than 70% of the rubber’s composition and cost. SBR is used in the production of tyres for the automotive industry.

But auto sales in Asia have been slowing down, which will translate to weaker demand for tyres.

Auto sales growth in China slowed to 3.2% in the first 10 months of 2011 against the 32% growth recorded in 2010, according to the China Association of Automobile Manufacturers.

Most major tyre makers in China, southeast (SE)Asia and India are operating at reduced rates of around 80%, industry sources said.

“Our tyre export sales to Europe, the Middle East, Africa, Australia, Thailand and Malaysia have dropped and we are operating our plants at a reduced rate,” a major tyre maker based in SE Asia said.

China and India saw declines in auto sales in October, following credit tightening measures by their governments to rein in inflation.

It was the first time in five months that China auto sales fell. Sales of passenger and commercial vehicles in the world’s largest automobile market fell 1.1% to 1.52m during the month, led by an 18% fall in minivan sales, industry data showed.

In India, domestic sales of cars in October fell 23.8%, while production fell 28.1% year on year, according to the Society of Indian Automobile Manufacturers. This is the biggest drop in sales since December 2000, when car sales fell 35%.

However, SBR producers are holding out for a price increase despite slowing demand from the downstream tyre makers.

“With the feedstock BD price rebounding so sharply and likely to increase further to $2,400-2,500/tonne CFR NE Asia, we have no choice but to raise our SBR offers or our margins will be eroded,” an SBR producer said.

($1 = €0.75)

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Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By: Helen Yan
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