03 August 2012 05:45 [Source: ICIS news]
By Helen Yan
Spot prices shed $100/tonne (€82/tonne) or 4% in three weeks to $2,400/tonne CFR (cost and freight) northeast (NE)
Downstream synthetic rubber producers deem BD prices above $2,300/tonne CFR NE Asia as not workable given current poor market conditions in the tyre industry.
BD is a raw material used to make synthetic rubbers, which go into production of tyres for the automotive industry.
“The automotive and tyre industries are very weak and demand for synthetic rubber has dropped, a synthetic rubber producer said.
“Our margins are being eroded by high BD costs and BD prices have to drop to around $2,200/tonne CFR for the synthetic rubber makers to post any margins,” he added.
But demand for tyres has been falling in view of softening auto sales in Europe, as well as in Asia’s huge emerging markets such as
Chinese and Indian tyre makers decided to cut operating rates at their production facilities and this has weighed down on consumption of synthetic rubber.
Non-oil grade 1502 styrene butadiene rubber (SBR) prices fell to $2,650-2,750/tonne CIF (cost, freight and insurance) China in the week ended 1 August, down by about $100/tonne in the past month, according to ICIS.
Prices of non-oil grade 1502 SBR need to be at least $400/tonne higher than BD, for the SBR producers to generate profits, industry sources said.
Synthetic rubber producers are insisting for lower BD prices at around $2,200/tonne CFR NE Asia as at current offers of $2,400/tonne CFR NE Asia for their production feedstock, hardly any margin can be generated.
Downward price pressures, however, may ease somewhat as supply will be shaved in
Major Taiwanese cracker operator, Formosa Petrochemical Corp (FPCC), will be shutting down its 1.03m tonne/year naphtha cracker in Mailiao for safety inspection in mid-August.
Safety checks at the production facilities at the Mailiao petrochemical complex are being required by the Taiwanese government following a string of fire incidents that occurred at the site last year.
“We have no spot BD cargo, as we will shut down the No 2 cracker in mid-August for 30 days for safety checks,” a company source said.
FPCC runs three crackers at Mailiao, with BD capacities totalling some 450,000 tonnes/year.
Currently FPCC’s No 2 cracker and its 1.2 m tonne/year No 3 cracker are running at full capacity, industry sources said.
The company’s third cracker – a 700,000 tonne No 1 unit – is currently being restarted after completing a turnaround from 19 June.
($1 = €0.82)
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