SE Asia SBR may bottom out as restocking ensues, NR rebounds

By Helen Yan

SINGAPORE (ICIS)–Styrene butadiene rubber (SBR) prices in southeast Asia may bottom out soon and possibly increase from the second half of February, on the back of restocking activities and a rebound in natural rubber (NR) prices, industry sources said on Wednesday.

Expectations that cost of feedstock butadiene (BD) will be on an uptrend will also provide additional support to SBR prices, they said.

On 5 February, non-oil grade 1502 SBR prices were assessed at an average of $1,900/tonne CFR (cost and freight) southeast (SE) Asia, down by $100/tonne from 18 December 2013, according to ICIS data.

“We anticipate the Chinese buyers to re-stock for March cargoes when most of them return from the Lunar New Year holiday next week,” an Asian SBR producer said.

The key Chinese market was closed for seven days – from 31 January to 6 February – for the Lunar New Year holiday, which is also celebrated in other parts of northeast and southeast Asia for a shorter period.

Most downstream local tyre factories in China were shut for  up to two weeks encompassing the week-long Lunar New Year celebration.

Demand for SBR has been subdued because of  weak economic conditions in Asia, with the Chinese economy slowing down and regional currencies, including the Thai baht, Indonesian rupiah and Malaysian ringgit depreciating against the US dollar.

Apart from weak demand, SBR prices were also dragged down by a 20% slump in the prices of NR – a substitute raw material to SBR in tyre production for the automotive sector – from early January to the first week of February.

Lower NR prices further weakens demand for SBR, as tyre makers in emerging markets have more flexibility in the substitution of these two raw materials in production despite some technical restrictions, industry sources said.

But this week, NR started to recover, with the physical prices of SMR20 grade NR at the Malaysian Rubber Exchange rising by 4. 5% from 7 February to $1,946/tonne FOB (free on board) Malaysia at midday on 12 February.

“SBR prices … will likely go up in March, given that the NR prices have rebounded and that the feedstock BD prices may be on the uptrend,” a tyre maker said.

Feedstock BD prices have been stagnating at $1,490-1,520/tonne CFR northeast (NE) Asia since 17 January, according to ICIS data.

Market players expect BD prices to be on an uptrend in March because of a heavy shutdown schedule at regional crackers from February to June, and amid news of recent outages and turnarounds at facilities in Europe and the US.

These market factors prompted major producers in Asia to raise offers for March SBR shipments to $1,950-2,000/tonne CFR (cost and freight) SE (southeast) Asia, industry sources said.

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