FocusChina SBR may extend falls as sellers offload surplus stocks

06 September 2012 08:13  [Source: ICIS news]

By Helen Yan

SINGAPORE (ICIS)--Spot styrene butadiene rubber (SBR) values in China may continue falling as sellers offload surplus stocks at lower prices, while demand has remained weak amid the global economic slowdown, market players said on Thursday.

On 5 September, SBR non-oil grade 1502 SBR spot prices were assessed at $2,350-2,400/tonne (€1,857-1,896/tonne) CIF (cost, freight and insurance) China, down by $50-100/tonne from the previous week, according to ICIS.

Prices have fallen by 12% from a month ago, and have been on a downtrend since late February, ICIS data showed.

“Demand is very poor and orders for SBR have dropped significantly as the downstream tyre makers are adopting a wait-and-see stance given the weak global market,” a Chinese SBR producer said.

Most tyre producers have been keeping lean inventories and are buying SBR on a “hand-to-mouth” basis because of weak global demand and market uncertainty.

China is a major production centre for the international tyre makers, and exports a significant proportion of its tyre output to Europe and the US.

With Europe deep in a sovereign debt crisis and the US economy struggling to recover, China’s tyre sales have been declining.

SBR supply in China is expected to lengthen with the Chinese economy also slowing down.

China's Purchasing Managers Index (PMI) has dropped to a nine-month low of 49.2% in August, indicating a contraction in manufacturing output.

The Chinese domestic market is very weak, and with new SBR supply expected to come on stream soon, product prices will be under further downward pressure, a Chinese producer said.

Among the plants that will start up soon is a 200,000 tonne/year unit of Fushun Petrochemical. Its start-up is set in the first half of September.

In late September, YPC-GRO (Nanjing) Rubber’s 100,000 tonne/year SBR plant will resume production after completing maintenance at the unit, while Tianjin Lugang Petroleum Rubber expects to restart its SBR unit with the same capacity in early October.

Some SBR producers are optimistic that product prices are nearing bottom and should rebound soon.

“Market sentiment is weak but we expect the downstream tyre makers to return to the market in the second half of September to restock their inventories,” a South Korean SBR producer said.

($1 = €0.79)

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

By: Helen Yan
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