FocusAsia rubber makers hike offers, cut output as BD costs surge

08 February 2012 04:22  [Source: ICIS news]

By Helen Yan

SBR and BR are used in the production of tyres for the automotive industry.SINGAPORE (ICIS)--Synthetic rubber producers in Asia are being forced to hike prices, or cut operating rates at plants, as the surging values of feedstock butadiene (BD) severely erode their margins, industry sources said on Wednesday.

Spot offers for non-oil grade 1502 styrene butadiene rubber (SBR) have increased to $3,600-3,700/tonne (€2,700-2,775/tonne) CIF (cost, freight and insurance) China this week, up by more than $300/tonne since early February, they said.

Feedstock BD, on the other hand, is currently being offered higher at $3,700-3,800/tonne CFR (cost and freight) NE (northeast) Asia, up by about $250/tonne from the assessed price last week, market sources said.

BD makes up about 70% of the composition and costs of SBR.

Downstream synthetic rubber producers have had to raise their offers by about $100/tonne every week because of the unabated surge in BD prices, industry sources said.

“We have no choice but to increase the SBR prices every week as the feedstock BD spot price is going up very sharply and very fast, and we have to play catch up or we will lose money,” said a northeast Asian SBR producer.

Prices of butadiene rubber (BR), another derivative synthetic rubber, are also spiraling upwards. BR is polymerized BD, with BD making up 100% of its composition and costs.

SBR and BR are used in the production of tyres for the automotive industry.

Spot offers for BR have jumped by $400-500/tonne to $3,900-4,000/tonne CFR Asia as producers attempt to protect their margins.

In the week ended 2 February, BR prices were at $3,350-3,550/tonne CFR NE Asia, according to ICIS.

“Our margins have fallen into negative territory and we have no choice but to increase our BR offers to $4,000/tonne CFR NE Asia,” a South Korean BR producer said.

Some BR producers in China, South Korea, Taiwan and Thailand chose to cut production to stem losses.

“We will cut the operating rate of our 55,000/tonne BR plant to 70% of capacity until the end of February as our margins are negative,” said a source at BST Elastomers, a Thai synthetic rubber producer.

In northeast Asia, LG Chem, Kumho Petrochemical Co (KKPC) and TSRC have reduced the operating rates at their plants to 70% of capacities.

“We cannot catch up with the feedstock BD price surge. Our BR prices are at same price levels with BD and I hear the BD price is still climbing up,” a South Korean BR maker said.

In the week ended 3 February, BD spot prices were assessed at $3,450-3,550/tonne CFR (cost and freight) northeast (NE) Asia, up by $400/tonne since early January, ICIS data showed.

BD spot prices have been on a roller-coaster ride since last year, with prices peaking at $4,300/tonne CFR NE Asia in July 2011 and then plunging to $1,550/tonne CFR NE Asia in November last year before climbing again at a rapid pace, according to ICIS data.

Production cuts at regional crackers in the fourth quarter of last year, along with expectations of tighter supply going into the first and second quarters of 2012 as crackers are due to shut for turnaround, fuelled the BD price surge since from November 2011.

($1 = €0.75)

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

By: Helen Yan
+65 6780 4359

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