04 October 2013 09:37 [Source: ICB]
Soaring feedstock BD costs have producers eyeing move
Styrene butadiene rubber (SBR) producers in Asia may have to cut output in October to prevent losses from soaring costs of feedstock butadiene (BD), if they failed to raise their product prices, industry sources said on 26 September.
Offers for fresh October shipments of non-oil grade 1502 SBR were nudged up to $2,000/tonne (€1,480/tonne) CFR (cost and freight) Asia, but buyers are firmly resisting selling quotes above $1,900/tonne CFR Asia, they said.
SBR prices could not increase as fast as its feedstock BD because of weak downstream demand.
BD is a raw material for the manufacture of SBR that go into tyres for the automotive industry. The automotive industry has remained sluggish amid a slowdown in the global economy.
From mid-August, SBR prices rose by about 8% to $1,850-1,900/tonne CFR Asia on 25 September, just a third of the 24% surge in BD prices over roughly the same period, according to ICIS data.
BD was last assessed at $1,400-1,450/tonne CFR Asia, with market players expecting further price spikes in the near term because of limited spot availability.
“We will cut the operating rate of our SBR plant in October to70-80% capacity if we cannot achieve $2,000/tonne CFR for non-oil grade 1502 as our margins are negative if BD prices continue to go up,” a northeast Asian SBR maker said.
A Chinese SBR major, meanwhile, is inclined to run its facility at 60% of capacity from next month up to the end of the year.
“We have no margins,” a source at the Chinese producer said.
BD makes up about 70% of the production cost of SBR. But SBR makers have not been able to pass on their surging cost of production to customers.
“SBR 1502 at $2,000/tonne CFR Asia is not workable and may result in demand falling,” a rubber distributor said.
A tyre maker also said: “We have SBR 1502 offers at $1,900/tonne CFR and $2,000/tonne CFR will be difficult to accept.”
For SBR producers, on the other hand, prices below $2,000/tonne will lead to losses.
“$2,000/tonne may seem quite high but we cannot cover our costs if BD prices go up further,” a southeast Asian SBR producer said.
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