03 July 2013 16:57 [Source: ICIS news]
LONDON (ICIS)--A 20% fall in the European July butadiene (BD) contract price has thrown the styrene butadiene rubber (SBR) market into some confusion, market players said on Wednesday.
BD is the chief raw material used in the production of SBR.
The BD contract price was agreed down by €250/tonne at €1,000/tonne ($1,299/tonne) FD (free delivered) NWE (northwest Europe) on Friday 28 June. Participants in the SBR market had expected a decline in BD values this month but the drop was substantially larger than anticipated.
Sources on both sides of the market said they had foreseen a reduction of €100-150/tonne for BD and were therefore surprised by its actual magnitude.
European SBR producers are having to reconsider their own pricing strategy in respect of contracts, although one stated that it was not proposing to pass on the entire fall in the BD value, but to seek instead a reduction of around €130/tonne.
A buyer in the tyre industry commented that its contract price for July would now broadly fall according to a formula linked to raw material cost.
If players in the contract sector were confused, the spot market was thrown into something approaching turmoil.
One trader said: "The spot market is completely killed," describing the situation as "a nightmare" because all buyers are waiting on the sidelines, trying to see how far down SBR prices could go in consequence of the near collapse of the raw material price.
In such a scenario and against a background of underlying demand that is seen as limp at best, traders admit that it is very difficult to assess what spot values are at present.
They say numbers within a markedly wide range are talked about but do not reflect actual trades, which are few and far between while potential buyers are in a wait-and-see mode. One trader concluded, "Nothing logical is happening at the moment. We hope for better times."
($1 = €0.77)
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