FocusAsia SBR dips 6% from mid-Oct; may extend falls on poor demand

16 November 2012 03:10  [Source: ICIS news]

By Helen Yan

Toyota car manufacturing plant in BritainSINGAPORE (ICIS)--Asia’s spot styrene butadiene rubber (SBR) prices may continue falling in the weeks ahead on lacklustre demand amid ample supply, and with slumping values of feedstock butadiene (BD) providing a further drag, industry sources said on Friday.

Non-oil grade 1502 SBR prices have shed $150/tonne from a month ago to $2,300-2,350/tonne (€1,794-1,833/tonne) CIF (cost, insurance and freight) China on 14 November, according to ICIS data.

“We expect demand for SBR to remain weak because of the slowdown in the global automotive sector,” said a northeast Asian producer.

Asia has been on the receiving end of excess SBR supply from Europe, where the downstream automotive industry is on a slump as the eurozone continues to struggle with a prolonged debt crisis, industry sources said.

“We are facing increasing competition from European suppliers as they are diverting their surplus SBR stocks to Asia,” the northeast Asia SBR producer said.

SBR is mostly used in the manufacture of tyres for the automotive sector. The tyre industry has been seeing significant decline in sales, in line with the poor vehicle market amid the global economic slowdown.

In Europe, global automakers such as General Motors, Ford Motor and Peugeot have announced plans to cut production via shutting down some of their assembly lines to reduce costs, spelling massive job cuts, as the deepening eurozone debt crisis has been eroding demand.

General Motors is expected to cut 2,600 jobs in Europe by end-2012, while Ford Motor plans to shut two plants in England next year and one in Belgium in 2014, cutting 6,200 jobs. Peugeot, on the other hand, is eliminating 8,000 positions and closing a factory near Paris.

In the US, tyre producer Goodyear Tire & Rubber Co plans to cut 200 jobs at its tyre plant in Fayetteville, North Carolina, according to local media reports. The Goodyear plant, which employs 2,750 staff, produces replacement tyres for passenger vehicles and light trucks.

Daily production at the plant has been cut to 29,000 tyres from 38,000 previously, according to the United Steelworkers of America.

Meanwhile, a territorial dispute between China and Japan over some uninhabited islands in the East China Sea is taking a toll on the Chinese automotive industry.

Japan’s carmakers such as Toyota, Nissan and Honda that have China operations are being forced to cut production as Chinese consumers are now refusing to buy Japanese brands.

Sales of Japanese passenger cars in China slumped by 59.4% year-on-year in October to 98,900, according to the China Association of Automobile Manufacturers.

On a month-on-month basis, Japanese passenger vehicle sales in China fell by 38.2% in October from September, the industry group said.

China is the biggest car market in the world and is considered a major tyre production centre.

But in view of the overall weakness in the global automotive market, tyre factories in China have been running at reduced rates, leading to lower consumption of raw material SBR.

“Demand from the downstream tyre makers is weak and as SBR suppliers have to clear their stocks before the end of the fiscal year, we can expect SBR prices to fall lower,” a Chinese SBR producer said.

Falling prices feedstock BD are also weighing on the SBR market. BD comprises about 70% of composition and production costs of SBR.

Asia’s BD prices were at $1,650-1,700/tonne CFR northeast (NE) Asia in the week ended 9 November, down by more than $200/tonne since mid-October, according to ICIS data.

“With the feedstock BD prices in decline, it may be difficult for the SBR prices to rebound in the near term,” an industry source said.

($1 = €0.78)

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

By: Helen Yan
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