14 March 2013 04:03 [Source: ICIS news]
By Helen Yan
SINGAPORE (ICIS)--Styrene butadiene rubber (SBR) prices fell during the week in Asia as plunging feedstock butadiene (BD) prices, abundant supply and weak demand forced traders to sell off their stocks at sharply reduced prices, industry sources said.
Non-oil grade 1502 SBR prices were at $2,350-2,450/tonne (€1,809-1886/tonne) CIF (cost, freight, insurance) China on 13 March, down by $50-100/tonne from the previous week, according to ICIS data.
Chinese domestic non-oil grade 1502 prices fell by yuan (CNY) 1,000/tonne ($161/tonne) to CNY16,000/tonne EXWH (ex-warehouse) during the week, according to Chemease, an ICIS service in China.
“Things are really bad. There is no demand for SBR, as everyone is holding high inventories, including traders, producers and tyre makers,” a Chinese SBR producer said.
“We may cut the operating rate of our SBR plant in the second quarter to 70-80% capacity, as demand is really weak,” the producer added.
The sharp fall in SBR prices was triggered by the plunging feedstock BD costs, industry sources said.
Feedstock BD prices fell by 9%, or $190/tonne, from the previous week to $1,860/tonne CFR (cost and freight) northeast (NE) Asia on 8 March, ICIS data showed.
BD is a major raw material in SBR, making up around 70% of its composition and production costs.
In view of the plummeting BD prices, traders have quickly liquidated their SBR stocks as they fear further price declines for the feedstock.
The clearing out of SBR stocks was also fuelled by recent weak economic data from China, which showed slowing industrial production growth and flagging retail sales in the world’s second largest economy.
China's industrial output had the weakest start to a year since 2009, showing only a 9.9% growth for January-February, compared with 10.3% in December last year.
Meanwhile, Chinese domestic retail sales fell from 15.2% in December to 12.3% in January-February.
Figures for January-February are combined to even out the impact of the Lunar New Year holiday, which fell on 9-15 February in China this year. This ensures consistency when comparing with past years’ figures.
Meanwhile, the high inventory levels of natural rubber (NR) and SBR at warehouses at Qingdao in Shandong province are adding to the woes of SBR producers.
“It will take about two months for the [NR and SBR] stocks to clear, as demand is really weak,” an industry source said.
NR and SBR are substitutes for each other in the production of tyres in the automotive industry, so their prices tend to impact each other.
SMR20 NR prices closed at $2,790/tonne FOB Malaysia at the Malaysian Rubber Exchange (MRE) on 13 March, down by $340/tonne from 6 February, when prices were at $3,130/tonne FOB Malaysia.
“Market sentiment is weak and the second quarter may be worse than expected,” another industry source said.
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