FocusAsia BR may rise in March on soaring feedstock BD costs

14 February 2013 05:44  [Source: ICIS news]

By Helen Yan

BR is a raw material used in the manufacture of tyres for the automotive sector.SINGAPORE (ICIS)--Spot butadiene rubber (BR) values in Asia look set to increase in March, largely on cost-push factors as prices of feedstock butadiene (BD) continued to rise, industry sources said on Thursday.

BR producers are offering March cargoes at $2,700-2,750/tonne (€1,998-2,035/tonne) CFR (cost and freight) NE (northeast) Asia this week, representing an average increase of $275/tonne from the latest ICIS assessment on 7 February, market sources said.

For four weeks straight since 17 January, BR prices had stagnated at $2,400-2,500/tonne CFR NE Asia, while BD values piled up 12% gains over the same period, according to ICIS.

BD prices were last assessed at $2,000-2,080/tonne CFR NE Asia on 8 February, bringing the average BR-BD price spread at $410/tonne, the data showed.

“We need a spread of at least $$700/tonne to have any margins, and with the feedstock BD prices now at above $2,000/tonne, we have no choice but to increase our BR prices,” a northeast Asian BR producer said.

Higher prices may be justified upon the return of Chinese market players next week, as buying interest is expected to pick up following the Lunar New Year holidays on 9-15 February, market sources said.

“We expect BR prices to rise to at least $2,600/tonne CFR NE Asia when the Chinese players return. The downstream tyre makers know that the feedstock BD costs have gone up significantly, and are likely to accept a higher BR price,” a northeast Asian BR producer said.

BR is a raw material used in the manufacture of tyres for the automotive sector.

Demand for the synthetic rubber has remained weak because of the sluggish automotive industry amid the global economic downturn.

In January, however, auto sales in China – the world’s largest automotive market – posted a strong year-on-year growth of 46%, boosting hopes of better demand for BR, industry sources said.

The country’s  auto sales  for January stood at 2.03m units – a record high for monthly sales, with production also at an all-time high of 1.96m units, up by 51% year on year, according to the China Association of Automobile Manufacturers (CAAM).

A record high number of passenger vehicles at 1.73m units were sold in China last month, up 48% from a year earlier, CAAM data showed.

Market players in the BR industry deem this development an auspicious start to 2013, following a dismal performance last year, when China car sales and production registered single-digit growths.

($1 = €0.74)

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

By: Helen Yan
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