Southeast Asia SBR may fall on oversupply; weak NR price drags

04 February 2014 06:46 Source:ICIS News

By Helen Yan

SBR is a raw material used in the manufacture of tyres for the automotive industry.SINGAPORE (ICIS)--Spot prices of styrene butadiene rubber (SBR) prices in southeast Asia may continue falling, with regional supply being augmented by cheaper European material amid weak demand and declining values of rival product natural rubber (NR), industry sources said on Tuesday.

Spot offers for non-oil grade 1502 SBR have dropped to $1,900-1,950/tonne CFR (cost and freight) southeast (SE) Asia this week, down by $50/tonne from previous offers, as Asian suppliers try to match the prices of European material in a bid to lock in volumes.

On 29 January, non-oil grade 1502 SBR prices were at $1,900-2,000/tonne CFR SE Asia, down by $50/tonne from 18 December 2013, according to ICIS.

“It is now a buyers’ market and the tyre makers will press for much lower prices. We anticipate prices to fall,” an industry source said.

Downstream tyre makers, meanwhile, are increasingly turning more towards European suppliers that can offer cheaper SBR, which are priced about $100/tonne lower than Asian cargoes, market sources said.

European synthetic rubber producers are not hampered by high cost of feedstock butadiene (BD), they said.

On 24 January, spot BD prices averaged $1,505/tonne CFR (cost and freight) northeast Asia, compared with European February contract prices at €945/tonne DEL (delivered), which is equivalent to $1,275/tonne DEL based on a conversion rate of $1.35 to €1.

“European SBR producers have the cost advantage of lower feedstock BD costs, so they can sell their SBR at much lower prices in Asia,” a trader said.

Asian SBR makers also have to contend with falling natural rubber (NR) prices, which tend to influence the SBR market.

At midday, SMR20 grade NR physical prices at the Malaysian Rubber Exchange stood at $1,918/tonne FOB (free on board) Malaysia, down by $381/tonne or 17% from early January.

NR and SBR are raw materials that can substitute each other in the production of tyres for the automotive sector.

Tyre makers in emerging markets tend to have more flexibility in the substitution of raw materials, industry sources said, citing some technical restrictions.

Meanwhile, a weakening of regional currencies against the US dollar, including the Thai baht, Indonesian rupiah and Malaysian ringgit has been deterring intra-regional trade in southeast Asia.

“It is difficult to sell SBR at the prices we are asking for in southeast Asia now, and we may move some of our product to the US as domestic prices there have gone up to more [than] $2,000/tonne, and we are getting some customer enquiries from there,” a southeast Asian SBR maker said.

In the US, Lion Copolymer has shut down its 130,000 tonne/year SBR plant in Baton Rouge, Louisiana from 3 February because of poor economic conditions.

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By Helen Yan