Polymers: SBR prices in Asia to bottom out, but deep-sea supply to cap rebound

29 June 2012 18:04  [Source: ICB]

Any rebound is expected to be modest, based on competitive offers from struggling European suppliers

Styrene butadiene rubber (SBR) prices in Asia may be nearing a bottom, but are unlikely to stage a sharp rebound because of competitive offers from European suppliers, which are diverting their surplus stocks to Asia, ­industry sources said.

"We are facing increasing ­competition from the European suppliers who are selling more of their cargoes in Asia because of poor demand in Europe," a northeast Asia SBR producer said. "Their competitive offers are making it difficult for SBR prices in Asia to trend up."

Deep-sea cargoes from Europe, including Russia and Eastern Europe, have been heading towards Asia in search of customers, given the slump in demand in Europe.

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SBR prices hover at the bottom as cargoes are diverted from Europe to Asia, where demand is also slowing

SPOT PRICES DROP

Spot offers of SBR non-oil grade 1502 from Eastern Europe and Russia are available at $2,450-2,500/tonne CFR (cost and freight) northeast (NE) Asia, which are at least $100/tonne lower than Asia-origin SBR, ­traders said.

"We can get offers of East European and Russian non-oil grade 1502 SBR at below $2,500/tonne CFR NE Asia," a China-based trader said.

The prevailing weak Europe market amid a deepening eurozone crisis has prompted some European SBR suppliers to target Asia as a long-term market, ­resulting in more volumes from Europe, including Russia and Eastern Europe, coming to Asia every month, traders said.

However, Asian SBR ­producers expect prices to stabilize and firm in the near term as demand has picked up.

"We are receiving more ­enquiries as the downstream tire makers are coming back to the market to re-stock their dwindling inventories," another ­northeast Asia SBR producer said. "They are anticipating that SBR prices may start to go up and are asking for more than the usual volumes to cover their third quarter requirements."

However, the SBR price rebound is expected to be modest and short-term, given the uncertain global market outlook and prospects of a global downturn, industry sources said. "We do not expect a sharp price rebound but we expect SBR prices to stabilize and firm in line with feedstock butadiene (BD) prices," a China-based SBR producer said.

Spot prices of non-oil grade 1502 SBR firmed by $50/tonne to $2,650-2,700/tonne CIF China in the week ended June 20, as ­assessed by ICIS.

In China, domestic BD prices surged by about yuan (CNY) 1,000/tonne to CNY16,300-16,800/tonne in the week ended June 20, lifting China domestic SBR prices in its wake.

China domestic non-oil grade 1502 SBR prices rose accordingly by CNY 400-500/tonne to CNY19,300-19,800/tonne EXWH (ex-warehouse) in the week ended June 20, said industry sources.

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

In light of the rebound in the Chinese market, Asian SBR producers are confident that SBR import prices are also likely to follow and rise in July, industry sources said.

TIRE MARKET BRAKES

However, downstream tire ­producers said that the SBR price rebound in China is a reaction to the feedstock BD domestic price increase and is not sustainable because fundamental demand remains weak.

Downstream tire makers in China and India are operating at reduced rates of about 80-90% of their capacities because of the sluggish global automotive ­market, industry sources said.

SBR is a major component in the production of tires for the ­automotive industry. "Growth in the global automotive industry is sluggish and demand for tires ­remains weak.

Sentiment is very poor and even the Chinese economy is slowing down. So we expect SBR prices to fall in the third quarter," a major India-based tire producer said.

Spot prices of non-oil grade 1502 SBR fell by $100/tonne to $2,500-2,600/tonne CFR India in the week ended June 20, as assessed by ICIS.

"We expect global automotive and tire demand to remain weak this year," another major downstream tire maker said. "Consumer confidence is lacking because of the crisis in Europe, a fragile US economic recovery and ­slowing economies in China and India."


Author: Feliza Mirasol and Helen Yan



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