OUTLOOK ’13: Asia SBR to remain flat in Q1 on subdued demand

28 December 2012 03:02  [Source: ICIS news]

By Helen Yan

SBR is used to make tyresSINGAPORE (ICIS)--Asia styrene butadiene rubber (SBR) prices are likely to remain flat in the first quarter of 2013 as demand is expected to be subdued because of the weak macro-economic outlook, industry sources said.

Spot offers of non-oil grade 1502 SBR have increased to $2,300-2,400/tonne (€1,725-1,800/tonne) CIF (cost, freight & insurance) China for fresh January and February shipments, but resistance from the downstream tyre makers has been strong because of the prevailing weak macro-economic conditions, industry sources said.

Non-oil grade SBR 1502 prices were at $2,200-2,300/tonne CIF China in the week ended 19 December, according to ICIS.

Despite rising feedstock butadiene (BD) or natural rubber (NR) prices, the main driver of the SBR price trend is fundamental demand, industry players said.

“Even if the feedstock BD or NR prices were to go up, it is difficult for SBR prices to go up too much if fundamental demand remains weak,” an industry source said.

Feedstock BD prices rebounded recently to above $1,600/tonne CFR (cost and freight) northeast (NE) Asia, up by about $120/tonne since late November while NR prices have increased to $2,920/tonne FOB (free on board) SE (southeast) Asia, up by $100/tonne from early December.

The feedstock BD prices make up about 70% of the composition and production costs of SBR. NR and SBR are substitutes for each other in the production of tyres for the automotive industry.

SBR producers and the downstream tyre makers have expressed their concerns about the sluggish global automotive industry.

Several major auto-makers including General Motors, Ford Motors and Peugeot, have announced job and production cuts at their plants in crisis-ridden Europe.

Asia is a major production centre for major tyre makers such as Bridgestone, Continental, Goodyear, Kumho, Michelin and Yokohama while China is the world’s largest automotive market.

Bargain hunting and competition from European SBR suppliers are also expected to cap SBR price gains in the first quarter.

“The downstream tyre manufacturers have earlier procured sufficient SBR stocks when SBR prices were at bottom to cover their January and February requirements, so it is difficult to see demand for SBR picking up significantly in the first quarter,” an industry source said.

Non-oil grade 1502 SBR recently bottomed out at $2,200/tonne CIF China in the week ended 5 December, down by about 10% since September, according to ICIS.

Non-oil grade 1502 SBR prices averaged $2,475/tonne CIF China on 26 September, ICIS data showed.

Asian SBR producers are, however, hopeful that demand may recover after the Lunar New Year, which falls on 10 February next year.

The key China market is closed on 9-15 February and trading activities tend to wind down a week or so prior to the holiday.

Other markets in Asia, including Hong Kong, Taiwan, South Korea, Singapore and Malaysia also observe the Lunar New Year and usually shut for at least two days for the festive occasion.

“Buying interest for SBR may pick up after the Lunar New Year and we expect prices to go up in the second quarter,” a northeast Asian SBR producer said.

However, industry players see challenges ahead in 2013 and are generally not optimistic that global fundamental demand will recover next year.

“It is difficult to see a bright future for SBR in 2013, given the weak macro-economic outlook. We also expect the European SBR suppliers to continue to divert their cargoes to Asia next year, which means more competition,” an industry source said.

($1 = €0.75)

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

By: Helen Yan
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