FocusAsia butadiene rubber prices to fall in April on lower BD costs

04 April 2012 06:52  [Source: ICIS news]

By Helen Yan

Asia butadiene rubber prices to fall in April on lower BD costsSINGAPORE (ICIS)--Asia’s butadiene rubber (BR) prices are set to drop in April because of lower feedstock butadiene (BD) costs, weak demand and competition from European BR suppliers, industry sources said on Wednesday.

April BR offers fell to $3,750-3,850/tonne (€2,850-2,888/tonne) CFR (cost & freight) Asia this week, down by $50-100/tonne from March contracts, industry sources said.

Feedstock BD prices were at $3,500-3,550/tonne CFR NE (northeast) Asia in the week ended 30 March, down by $500/tonne from early February when prices peaked at $4,000/tonne CFR NE Asia, according to ICIS.

The demand for BR in Asia has been weak because major Asian economies such as China and India have slowed down.

The Chinese government has revised its GDP growth target for 2012 to 7.5%, down from the 8% target that was kept for the previous seven years, while India’s economy grew by 6.9% in the 2011 fiscal year, its slowest pace in three years.

The demand for BR has also been weakened as Europe is still struggling with its debt crisis.

BR is used in the manufacture of tyres for the automotive industry and Europe is a major export market for tyre makers in China and India.

“We expect [tyre demand in] the second quarter to be flat or soft. Overall, Indian tyre exports to Europe have fallen by 10-15% and we don’t expect much improvement in the second quarter,” an Indian tyre maker said.

Low tyre export volumes to Europe have weakened market sentiment and prompted the downstream tyre makers in Asia to cut back their production and reduce their BR consumption, industry sources said.

Adding to the woes of the Asian BR producers is competition from European BR suppliers who have diverted their surplus stocks to Asia, given the weak European market.

“The European suppliers have been making inroads into the Asian market and Asian producers have no choice but to reduce their prices to match the lower offers of the European suppliers,” a trader said.

“We get BR offers at $3,600/tonne CFR India or even lower from the European suppliers and the Asian BR producers have to match these offers and reduce their prices if they wish to close any deals,” a downstream tyre maker in India said.

Asian BR producers include Korea Kumho Petrochemical (KKPC), South Korea’s LG Chem, Taiwan’s TSRC Corp, China's Sinopec Shanghai Gaoqiao Petrochemical, China’s Huayu Rubber, Japan’s JSR Corp and Thailand’s BST Elastomers.

European BR producers include German-based Lanxess, Italy’s Polimeri Europa and Poland’s Synthos.

($1 = €0.76)

By: Helen Yan
+65 6780 4359

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