Price and market trends: Asia BR prices set to rise on higher feedstocks

22 February 2013 10:27  [Source: ICB]

Higher butadiene feedstock prices are likely to push spot butadiene rubber prices up as auto sales give extra boost

Spot butadiene rubber (BR) values in Asia look set to increase in March, largely on cost-push factors as feedstock butadiene (BD) prices continued to rise, sources said.

BR producers were offering March cargoes at $2,700-2,750/tonne (€1,998-2,035/tonne) CFR (cost and freight) NE (northeast) Asia the week ended 15 February, an average increase of $275/tonne from the latest ICIS assessment on 7 February, 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.

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, 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 posted a strong year-on-year growth of 46%, boosting hopes of better BR demand, 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 - 1.73m units - were sold in China last month, up 48% year on year, CAAM data showed.

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 growth.

By: Helen Yan
+65 6780 4359

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