FocusAsia April SBR contract talks in deadlock on volatile BD market

16 March 2012 06:20  [Source: ICIS news]

By Helen Yan

BD makes up about 70% of the composition and production costs of SBR, which goes into the manufacture of tyres for automobiles.SINGAPORE (ICIS)--Negotiations on Asian April styrene butadiene rubber (SBR) contracts have stalled amid volatile movement in prices of feedstock butadiene (BD), market sources said on Friday.

April contract offers for non-oil grade 1502 SBR are currently at $3,700-3,800/tonne (€2,812-2,964/tonne) CFR (cost and freight) Asia, up $100-200/tonne from March settlement, while downstream tyre makers are demanding a roll-over of the previous month’s prices,  market sources said.

Spot prices of feedstock BD appear to be on a rebound this week after shedding about $600/tonne since early February, with a recent sale tender fetching a free on board (FOB) price of $3,400-3,420/tonne. The FOB Map Ta Phut price is equivalent to $3,550/tonne CFR (cost and freight) NE (norhtheast) Asia after taking into account a $150/tonne freight rate from southeast Asia to northeast Asia.

In the week ended 9 March, BD was assessed at $3,350-3,400/tonne CFR NE Asia, according to ICIS.

BD makes up about 70% of the composition and production costs of SBR, which goes into the manufacture of tyres for automobiles.

“The BD price has been fluctuating wildly and we are closely watching the BD market and will only settle our April SBR contracts towards the end of March after we get a clearer idea of the BD price direction,” a major Japanese tyre producer said.

SBR producers hiked their offers for April contracts in a bid to regain margins lost because of soaring BD cost.

BD prices have been on a roller-coaster ride, hitting a peak of $4,300/tonne CFR NE Asia in July 2011 before plunging to $1,600/tonne CFR NE Asia in November 2011 and then spiraling up again to $4,000/tonne CFR NE Asia in early February 2012.

A spate of unplanned and planned cracker and synthetic rubber plant production cutbacks and shutdowns as well as traders’ speculative activities have resulted in a volatile BD market, industry sources said.

“The tyre makers are seeking a roll-over from March settlements, but our margins have been eroded by the spike in the feedstock BD price earlier this year and we have no choice but to increase our SBR prices in April to regain our margins,” a Korean SBR producer said.

March contracts for non-oil grade 1502 SBR were settled at $3,500-3,600/tonne CFR Asia.

($1 = €0.76)

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

By: Helen Yan
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