By Malini Hariharan
Styrene butadiene rubber (SBR) prices, which have nearly doubled over the last year, may be heading for a much needed correction.
The strength in feedstock butadiene markets and strong demand from the automotive sector have so far helped support the high numbers. But a key concern is that China's tightened monetary policy will dampen sentiment and slow down SBR demand in Asia, writes Helen Yan, ICIS pricing editor for synthetic rubber.
Traders have started complaining about difficulties in accessing funds from banks and with credit expected to remain tight through the rest of the year restocking activity will be affected.
Growth in Chinese auto sales is also slowing down as the government's massive auto-subsidy program has ended. Additionally, rising fuel prices, implementation of anti-congestion programmes in some cities and new fuel-efficiency standards has also affected sales.
Chinese auto makers have projected 10-15% increase in car sales for the full year, down from 32% growth last year while foreign auto makers are projecting even slower growth of 5-10%.
Falling natural rubber prices are also expected to put pressure on SBR.
Chinese SBR imports dropped 20% in the first quarter to 79,000 tonnes and volumes in this quarter are likely to be lower if current market conditions continue.
A correction in SBR prices seems likely. The blog is waiting to see if this will drag down butadiene prices