FocusAsia BR price pressures heighten on supply from east Europe

26 October 2012 06:40  [Source: ICIS news]

By Helen Yan

SINGAPORE (ICIS)--Asia’s butadiene rubber producers face increasing competition from east European suppliers, which have been diverting surplus stocks into the region, while no recovery in demand is imminent in the near term, industry sources said on Friday.

Availability of lower-priced material coming from eastern Europe will further weigh on Asian BR values into next month, they said.

Spot BR prices were assessed at an average of at $2,650/tonne (€2,041/tonne) CFR (cost and freight) NE (northeast) Asia on 25 October, down by $100/tonne from two weeks ago, according to ICIS.

“We lost out one contract for November and December delivery of BR to a European supplier who quoted much lower than our offers,” a northeast Asian BR producer said.

BR from east Europe is usually priced $50-100/tonne lower than Asia-origin material, market sources said.

Demand in Europe is slumping amid the ongoing eurozone debt crisis, prompting that region’s producers to export more to Asia, where demand, although soft, has not fallen as steeply as in Europe, industry sources said.

China and India, the giant emerging markets of Asia, are major consumers of BR, which goes into the production of tyres for the automotive sector.

“Some European BR suppliers have been very aggressive in the Indian market and we have been getting very competitive offers from them. We expect BR prices to drop lower to around $2,500/tonne CFR India in November,” an Indian buyer said.

Falling prices of feedstock butadiene (BD) are also dragging down BR values.

“Demand for BR is flat and we have revised our BR offers down in line with the drop in the feedstock BD price,” a northeast Asian BR producer said.

BD prices were assessed at $1,840-1,860/tonne CFR NE Asia on 19 October, down by about $50/tonne from the previous week, according to ICIS.

 “Bids for BR are at around $2,650/tonne CFR NE Asia or lower than this level as demand for BR is very weak in China,” a Chinese trader said.

Demand for BR is expected to remain weak in Asia as indicated by falling vehicle sales and cuts in production by automakers in China – the world’s biggest automotive market.

The country’s territorial dispute with Japan over a group of islands in the East China Sea has led to a halt in production at some manufacturing sites of Japanese car makers like Toyota in China. Sales of Japan-branded cars in China also declined.

In September, Toyota Motor Cop saw a 48.9% year-on-year slump in car sales in China, while Nissan Motor Co and Honda Motor Co witnessed a 35.3% and a 40.5% decline in sales in the country, respectively.

($1 = €0.77)

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections
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By: Helen Yan
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