Asia SBR under pressure from influx of deep-sea supply, NR fall

Focus story by Helen Yan

SINGAPORE (ICIS)–Styrene butadiene rubber (SBR) prices in Asia may come under pressure in the weeks ahead because of ample availability of spot material amid an influx of deep-sea cargoes into the region, market sources said on Thursday.

Abundant supply of rival product natural rubber (NR) will also weigh down on the regional SBR market, they said.

Non-oil grade 1502 SBR prices were assessed at $1,940-1,980/tonne CFR (cost and freight) southeast (SE) Asia on 16 July, up by $135/tonne or 7.4% since 2 April on the back of surging costs of feedstock butadiene (BD), according to ICIS data.

Prices of feedstock BD have risen steadily from mid-May, gaining 23.6% to average $1,520/tonne CFR NE Asia on 11 July, ICIS data showed.

Asian SBR makers find themselves competing with supply coming from Europe, market sources said.

European SBR producers have the cost advantage of lower feedstock BD costs, thus making it possible for them to sell at competitive prices to southeast Asia and still generate higher margins, market players said.

“We can easily procure Europe-origin SBR at competitive rates, and we also have the option to change our formulations and switch to using more NR, which is cheaper than SBR, ” said a downstream tyre producer in Southeast Asia.

Additional SBR supply from India may further exert downward pressure on  SBR prices in Asia, with new capacities built in the country.

Indian Synthetic Rubber Ltd (ISRL) started up its new 120,000 tonne/year SBR plant in Panipat earlier this year, while conglomerate Reliance Industries (RIL) is expected to bring its new 150,000 tonne/year SBR plant on stream within the third quarter.

Meanwhile, weakness in the NR market, which is long in supply, is providing added pressure to SBR prices.

NR and SBR are substitutes for each other in the production of tyres for the automotive industry, and their prices tend to impact each other, market sources said.

“NR supply is abundant and NR prices are likely to remain soft in the third quarter, which means it may be difficult for SBR prices to rise further,” an SBR producer said.

On 16 July, SMR20 tyre grade physical NR prices were at $1,670/tonne FOB (free on board) Malaysia at the Malaysia Rubber Exchange, falling by about 14% from 1 April.

Some downstream tyre makers in emerging market countries have modified their formulations so they can easily switch to using lower-priced NR instead of SBR as feedstock for production, industry sources said.

Those in emerging countries have more flexibility in making changes in their product formulation to make the switch to NR from SBR, they said.

Demand for SBR is at a seasonal lull in the summer months of June to August, and producers are concerned that demand in the key China market may wane amid moves in the US to slap antidumping duties (ADDs) on tyre imports coming from the northeast Asian country.

The United Steelworkers (USW) filed a petition on 3 June to the International Trade Commission (ITC) and Department of Commerce in the US, requesting ADDs to be imposed against passenger and light truck tyres imported from China.

Since the US’ tariffs on Chinese tyres ended in September 2012, USW cited that Chinese tyre shipments have more than doubled.

On 15 July, the USW issued a statement that the US Department of Commerce has confirmed that the government is proceeding with the union’s trade case petition filed 3 June  against imports from China of passenger vehicle and light truck tyres.

A number SBR plants in China are currently running at just about half their capacities, including Lanzhou Petrochemical, Zhechen Rubber, Fuxiang Chemical and Zhejiang Weitai Rubber, given the demand lull from downstream tyre producers, market sources said.

“The small and medium-sized tyre makers in China will either shut for maintenance or run at reduced rates in July and August. And with NR prices lower than SBR, they will also switch to using more NR in their formulations,” a Chinese SBR producer said.

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