FocusEuropean SBR exports up 45% driven by poor local demand

21 November 2012 16:31  [Source: ICIS news]

LONDON (ICIS)--Emulsion styrene butadiene rubber (E-SBR) exports from the EU to the rest of the world have increased by 45% during the first eight months of 2012 compared to the same period in 2011, Eurostat data showed on Wednesday.

During the first eight months of last year, 91,171 tonnes of E-SBR were exported from the EU to the rest of the world. This increased to 132,823 tonnes during the same period in 2012, up by around 41,000 tonnes.

The increase in exports from the EU is a result of a drastic fall in E-SBR demand from the European tyre industry, leading European producers to seek to offload stocks in overseas markets where prices were higher.

"As Europe is hardly moving, material is exported to other countries [so that producers can maintain] their total sales capacity," an SBR buyers said.

A major SBR producer in Europe said that most European sellers have indeed been seeking to offload stocks abroad, especially in Asia, where prices were more competitive and demand held up even when European sales fell.

"Because the European market is weak, sellers are exporting to other countries to secure sales volumes," the producer said.

So far this year SBR demand has fallen by about 15%, mostly because tyre sales are down, the producer added. The tyre industry is the largest SBR consumer. When tyre sales fall, SBR demand drops.

Passenger replacement tyre sales declined by 18% during the first 10 months of 2012 , while truck tyre sales fell by 30%, a tyre producer said.

In addition, the European market for new passenger cars continued to shrink in October, the European Automobile Manufacturers’ Association (ACEA) said. In October, 959,412 new passenger cars were registered in the EU, down by 4.8% from the same month in 2011, continuing a downward trend which began in October last year.

This is bad news for the industry, which has been under pressure from high feedstock costs and low sales volumes throughout the year. And because feedstock butadiene (BD) prices are higher in Europe then in Asia now, the arbitrage window for exports have closed, an exporter said.

According to ICIS, in Asia BD is traded at $1,630-1,700/tonne CFR (cost and freight ) northteast (NE) Asia (€1,271-1,326/tonne), while in Europe it is €1,480/tonne free delivered (FD) northwest Europe (NWE) now. November 1500 grade SBR contracts settled at €2,050/tonne FD NWE in Europe, while the same grade SBR is traded at $2,300-2,350/tonne CIF (cost, insurance, freight) China.

The price difference means that there is little scope to export to Asia at the moment as Asian buyers can get material cheaper locally.

As a result, exports in September held up, but in October and November there was a visible drop in overseas sales as European SBR became more expensive, driven by high feedstock and production costs, sources said.

People are driving less because of high fuel costs, and shrinking levels of disposable household income in cash-strapped European countries mean that fewer consumers in the region are buying new cars, meaning that the current downturn could last well into the second half of next year, sources said.

What most market participants are now doing is hoping for a better year in 2013, and that a cold winter that could stimulate winter tyre sales.

"The problem is, it is 20 degrees in Rome now and my needs are covered for November and December, so it is unlikely I will buy anything more [SBR] this year," a tyre producer in southern Europe said. 

($1 = €0.78)

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By: Janos Gal
+44 208 652 3214

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