Bank upgrades Poland's Synthos on hopes of Q2 BD, SBR price recovery

10 April 2013 14:02  [Source: ICIS news]

LONDON (ICIS)--WOOD & Company has upgraded its rating on the stock of major synthetic rubber producer Synthos to 'Hold' from 'Sell', noting there is still a possibility of a Q2 butadiene (BD) and styrene butadiene rubber (SBR) price recovery, the investment bank said on Wednesday.

“While we continue to see potential for a BD and SBR price recovery in the second half of the year, the market balance remains fragile, with depressed auto and tyre sales, and bottoming Asian BD prices on soft downstream demand weighing negatively on SBR prices and margins,” said Piotr Drozd, a chemical industry analyst at the Prague-based bank.

In a note to investors, he added: “Against the BD price slump in Asia to $1,500-1,550/tonne [€1,140-1,178/tonne] in March, driven by the high BD stocks built up before the Chinese New Year and poor end-demand, the potential for a pronounced upswing seems low at the current juncture.

“However, with the BD supply glut being slowly cleared from the market, we continue to see some scope for a BD price uptick from the current levels in the second half of 2013.”

Poland-based Synthos saw European BD and SBR contract prices retreat by 7.1% and 8.2% quarter on quarter in the first quarter of this year, respectively, bringing about a 19% quarter on quarter monomer margin contraction, Drozd noted.

April BD contracts at €1,415/tonne ($1,862/tonne) – down 37% year on year and flat month on month – further reflect the sluggish European demand, he added.

For April, both BD and SBR contract prices were rolled over.

In late March, WOOD & Company concluded that weak BD prices meant Synthos was finding it difficult to benefit from its integration of BD into its feedstock production.

($1 = €0.76)

By: Will Conroy
+44 20 8652 3214

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