FocusAsia BR downtrend to persist on weak demand, plunging BD prices

04 May 2012 06:10  [Source: ICIS news]

By Helen Yan

BD is a raw material for the production of BR, which, in turn, is used in the manufacture of tyres for the automotive sector.SINGAPORE (ICIS)--Asia butadiene rubber (BR) prices look set to fall further, tracking steep declines in values of feedstock butadiene (BD), given continued weakness in demand, industry sources said on Friday.

Spot BR prices shed about 5% or $150-200/tonne (€114-152/tonne) in the week ended 3 May to $3,450-3,500/tonne CFR (cost and freight) northeast (NE) Asia, according to ICIS.

BD values, on the other hand, declined $14% or by $450/tonne in the week ended 27 April to $2,750-2,800/tonne CFR NE Asia, ICIS data showed.

“If the feedstock BD price falls further to below $2,500/tonne, this means that the BR price will follow suit and are likely to drop further to around $3,200/tonne,” a downstream tyre producer said.

BD is a raw material for the production of BR, which, in turn, is used in the manufacture of tyres for the automotive sector.

At current prices, the average BR-BD spread is computed at $700/tonne – at the upper end of the $600-700/tonne range that allows BR producers to generate marginal production margins.

BR may not find support on the demand front because of a general weakness in the global economy – with Europe still mired in a sovereign debt crisis, the US economy still showing weakness and China slowing down.

Consumers across all geographies tend to cut back on car purchases given a weak job market, thereby affecting BR consumption.

“We expect the second quarter to remain soft and do not expect demand to pick up in view of the uncertain global market outlook,” a China-based tyre producer said.

Tyre makers in China, which is a key importer of synthetic rubber in Asia, are mostly running their plants at reduced capacities of 50-60% amid declines in sales in the domestic and export markets.

China ranks as the largest car market in the world, but the country’s first-quarter 2012 auto sales fell 3.4% year on year. For the whole of 2011, car sales recorded a minimal growth of 2.5%, official data showed

“The market is very weak and even though we quote very competitive offers, the Chinese traders and tyre makers are not buying. We have so much stocks to clear and there are no buyers,” a BR trader said.

($1 = €0.76)

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

By: Helen Yan
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