Price and market trends: Asia SBR heads to US on open arbitrage window

24 May 2013 09:22  [Source: ICB]

Falling Japanese yen makes exports more competitive as arbitrage opportunities abound to the West

Asia's styrene butadiene rubber (SBR) producers are shipping out surplus stocks to the US market, where prices are higher, while regional demand is still weak, industry sources said.

"It is tough now selling in Asia as competition is very stiff, so it makes sense for Asian producers to export to the US," an industry source said on 15 May.

Non-oil grade 1502 SBR is priced at around $2,100/tonne (€1,617/tonne) CFR (cost and freight) in Asia, while the same product could fetch up to $2,400/tonne CFR in the US, industry sources said.

With freight costs from Asia to the US at around $100/tonne, the US is an attractive option for Asian SBR producers, given the weak market sentiment in Asia, they said.

"Demand in Asia is sluggish and competition is very tough," said a source at a South Korean producer, which is currently working at exporting a 2,000-tonne non-oil grade SBR 1502 spot cargo to the US in June. The volume is on top of its usual 3,000-tonne monthly contract volume that the producer ships out the US, the source said.

Forex influence
Apart from arbitrage opportunities, the sharp fall of the Japanese yen in the foreign exchange market is also spurring Japanese SBR makers to export more to the US.

"We sold a small non-oil grade 1502 SBR spot volume to the US. But the US market is small compared to our market share in Asia," a Japanese SBR producer said. The yen (Y) is currently trading at above Y100 to the US dollar, depreciating by more than a quarter from levels in October last year - triggered by the Japanese government's adoption of a more aggressive fiscal and monetary policy to push for economic growth. A weaker currency makes a country's exports more competitive.

"The Japanese SBR makers are offering very competitive rates and making it very tough for other Asian producers to compete, whether in Asia or in the US," an industry source said.

However, some Asian SBR producers said that spot enquiries from the US are few and far between, and that trades to the US from Asia are usually under term contracts, rather than spot.

"It is not easy to sell spot to the US because of the high freight costs and competition," another south Korean rubber maker said.

"The US is not our main export market, but if there are enquiries from the US, we can consider exporting spot cargoes to the US," a southeast Asian SBR producer said. Asian SBR producers include Korea Kumho Petrochemical Co (KKPC), LG Chem, Asahi Kasei, JSR, TSRC, Zeon and BST Elastomers.

By: Helen Yan
+65 6780 4359

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