16 October 2013 07:03 [Source: ICIS news]
By Helen Yan
SINGAPORE (ICIS)--Spot styrene butadiene rubber (SBR) prices in Asia may remain buoyant for the rest of the month through to November, largely on cost-push factors as demand from downstream tyre makers will soon taper off, industry sources said on Wednesday.
Tyre makers typically trim their inventory towards the end of the year, leading to lower consumption of raw material SBR, they said.
On 9 October, non-oil grade 1502 SBR prices were assessed at an average of $2,000/tonne (€1,480/tonne) CIF (cost, insurance and freight) China, up by about 10% from mid-September, according to ICIS data.
On the other hand, prices of feedstock butadiene (BD) – which accounts for 70% of SBR cost – at $1,650/tonne CFR (cost and freight) northeast (NE) Asia on 11 October have increased at more than twice the speed of SBR’s over roughly the same period.
SBR producers cite margin erosion as the main reason for their higher offers.
“We have no choice but to raise our offers because of margin squeeze from the BD price surge,” a northeast Asian SBR producer said.
SBR is a type of synthetic rubber used in the production of tyres for the automotive industry.
Concerns over the sluggish global automotive industry amid continued weakness in the global economic conditions have made the end-users wary of the continued rise in SBR prices, industry sources said.
Although auto sales in the key China market have improved recently, tyre exports to Europe and the US are still subdued, they said.
China’s September total auto sales, including trucks and buses, stood at 1.94m units, representing a 20% year-on-year increase, according to the China Association of Automobile Manufacturers (CAAM).
“Demand for tyres in Europe and the US has not fully recovered and the Chinese tyre makers who target these export markets are finding it difficult to increase their export sales,” an industry source said.
Tyre makers will only be buying on a “hand-to-mouth” basis if SBR prices continued to increase, a major China-based downstream tyre maker said.
“[We] will resist offers of non-oil grade SBR above $2,000/tonne,” he said.
Come December, SBR demand is expected to taper off as tyre makers tend to lean inventories towards the end of the year, industry sources said.
“It is possible that customers may not place many large orders in December, so SBR prices may not increase as much,” a southeast Asian SBR maker said.
Traders are also expected to clear their surplus SBR stocks prior to the end of the fiscal year, industry sources said.
“SBR prices may soften when traders start to clear their stocks,” a Chinese SBR producer said.
($1 = €0.74)
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