31 May 2012 07:03 [Source: ICIS news]
SINGAPORE (ICIS)--Asia’s butadiene rubber (BR) prices are likely to drop further in June because of declining feedstock butadiene (BD) prices, weak demand and oversupply, industry sources said on Thursday.
Spot BR prices were at $3,000-3,200/tonne (€2,430-2,592/tonne) CFR (cost & freight) northeast (NE) Asia in the week ended 24 May, down by $500-600/tonne since late April, according to data from ICIS.
“There may be room for BR prices to fall further to below $3,000/tonne as feedstock BD prices have dropped sharply,” a trader said.
Feedstock BD prices fell to $1,950-2,000/tonne CFR NE Asia in the week ended 25 May, down by $800/tonne since late April this year, ICIS data showed.
“If feedstock BD prices continue to drop, this will put more downward pressure on BR prices to fall further to around $2,600/tonne or below, as the spread between BD and BR is [typically] $600-700/tonne,” a trader said.
Apart from falling feedstock BD prices, weak demand and oversupply are weighing down BR prices, industry sources said.
“Demand in Europe has slumped and European BR suppliers are dumping their material in Asia, which is putting more pressure on BR prices [in Asia],” a trader said.
To compete with the European suppliers, Asian BR producers are offering significant price discounts to clear their ample stocks, industry sources said.
“We understand that a major Asian BR producer has reduced its offers by at least $200/tonne to below $3,000/tonne, as they have surplus stocks to offload,” a trader said.
Asian BR producers have been burdened with mounting inventories as several downstream truck tyre producers in Asia have reduced their plant operating rates to 50-60% capacity in response to weak end-user demand.
BR is a major feedstock for tyre production for the automotive industry.
Asia is a major tyre production centre and falling auto sales and weak tyre demand in China, Europe and the US, has pressured the tyre makers in Asia to cut back on their production output.
“Small and medium-sized Chinese tyre makers have cut back on their production output significantly as their export tyre sales have dropped sharply, given the economic and political turmoil in Europe and weak US market,” a Chinese BR producer said.
A slowing Chinese economy has worsened the situation, industry sources added.
Vehicle sales in the first four months of 2012 declined by 1.3% year on year in China, the world’s biggest car market, official data showed.
($1 = €0.81)
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