FocusAsia BR bottoms out as BD rebounds; strong gains unlikely

14 December 2012 03:53  [Source: ICIS news]

By Helen Yan

BR is a raw material for the manufacture of tyres for the automotive industry. SINGAPORE (ICIS)--Butadiene rubber (BR) prices in Asia firmed up to an average of $2,375/tonne (€1,805/tonne) this week, after shedding about 15% since October, following a rebound in values of feedstock butadiene (BD), market sources said on Friday.

Further gains, however, will likely be capped as the regional market is in long supply of BR while demand is not expected to recover soon, they said.

In the week ended 13 December, BR prices were assessed at $2,350-2,400/tonne CFR (cost and freight) northeast (NE) Asia, up by $50/tonne at the low-end of the range compared with the previous week’s levels, according to ICIS.

On 7 December, BD was assessed at an average of $1,510/tonne CF NE Asia, up $40/tonne week on week, ICIS data showed.

BR largely tracked the prices BD, which plunged by 25% or $500/tonne from late September to end-November before recovering in December.

“Unless the BR producers further cut their operating rates or shut their plants, it will be difficult for the BR prices to go up much as demand seems rather soft,” a northeast Asian BR producer said.

Against the backdrop of a slumping global automotive industry, support for BR prices will only be derived from rising feedstock cost for the time being, industry sources said.

BR is a raw material for the manufacture of tyres for the automotive industry.

“The downstream tyre makers have earlier secured sufficient BR stocks when prices were at bottom to cover their requirements till February next year, so demand is likely to remain weak until after the Lunar New Year,” an industry source said.

The Lunar New Year, which falls on 10 February in 2013, is observed in countries across Asia, including China, Taiwan, South Korea, Singapore and Malaysia.

“It [2012] has been a very difficult year and we do not expect demand for BR to pick up until after the Lunar New Year,” a BR producer said.

Global car makers have been cutting back production because of lacklustre demand amid the murky world economic prospects, thereby significantly reducing BR consumption.

Major car makers including General Motors, Ford Motor Corp and Peugeot have announced job and production cuts in their plants in Europe.

Asia is a major production centre for tyre makers including Bridgestone, Continental, Goodyear, Hankook and Michelin, while China is the world’s biggest automotive market.

($1 = €0.76)

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

By: Helen Yan
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