Price and market trends: Asia butadiene prices poised to fall in June

07 June 2013 10:06  [Source: ICB]

Demand in China from the automotive tyre sector is weakening, leading to higher inventories

Asia butadiene (BD) prices may continue to decline in June given a strong build-up of stocks because of prevailing sluggishness in the derivative styrene butadiene rubber (SBR) market, industry sources said.

"Traders have too much BD stocks in-hand, while there is little spot appetite for BD because the downstream SBR market is weak," an industry source said on 29 May.

On 24 May, BD spot prices fell to $1,450-1,500/tonne CFR (cost and freight) northeast (NE) Asia, after stagnating at $1,450-1,520/tonne CFR NE Asia the previous three weeks, ICIS data shows.

"Chinese demand for BD is weak, and BD prices are likely to fall below $1,450/tonne CFR NE Asia soon," a Chinese trader said.

Rising concerns over a slowing Chinese economy amid a sluggish automotive industry and falling natural rubber (NR) prices have weighed on demand for SBR, industry sources said.

"There is little support for BD if demand for SBR and NR remains weak," an industry source said.

SBR, NR PRICE LINK
SBR and NR are raw materials used in the production of tyres for the automotive industry, and their prices tend to have an impact on each other.

Non-oil grade 1502 SBR prices were assessed at $2,000-2,100/tonne CIF (cost, insurance and freight) on 22 May, down by 18%, or more than $400/tonne since early March, according to ICIS.

Meanwhile, tyre grade SMR20 NR prices were at $2,410/tonne free on board (FOB) Malaysia on 28 May at the Malaysia Rubber Exchange, down by nearly $500/tonne or 17% from March.

China, which is the world's largest automotive market and a major production centre for tyre makers, recorded lower vehicle sales in April at 1.84m units, down from a record high of 2.03m units in March, official data showed.

In May, manufacturing activities in the country indicated a contraction based on HSBC's preliminary purchasing managers' index (PMI). HSBC's flash China PMI was at a seven-month low of 49.6 in May, down from 50.4 in April. PMI is a reading of an economy's manufacturing activities, with a reading above 50 indicating expansion and a number below denoting contraction.

"Tyre makers in China are operating at reduced rates of 70-80% on average because of the weak automotive industry and demand for SBR has fallen," a Chinese SBR producer said.

However, major SBR producers in Asia would not welcome a significant decline in BD values as this would take away the support for SBR prices, sources said.

"If the BD price falls sharply, it will put pressure on the SBR price," a South Korean SBR producer said.


By: Helen Yan
+65 6780 4359



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