Asia PBR may defy falling NR on possible BD rebound

Focus story by Helen Yan

SINGAPORE (ICIS)–Spot prices of polybutadiene rubber (PBR) in Asia may remain firm despite tumbling values of rival product natural rubber (NR), on expectations that costs of feedstock butadiene (BD) may soon rebound, market sources said on Thursday.

PBR producers have kept their offers this week at  $2,000-2,100/tonne CFR (cost and freight) northeast Asia for September shipments, while buyers were insisting on lower prices in view of NR weakness, they said.

PBR prices were last assessed at an average of $2,075/tonne CFR NE Asia on 21 August, according to ICIS data.

NR and PBR are used  in the production of tyres for light trucks and commercial vehicles.

SMR 20 tyre grade NR prices closed at  $1,650/tonne FOB (free on board) Malaysia at the Malaysian Rubber Exchange on 27 August, shedding about 25% since the beginning of 2014 because of oversupply. New supply coming into the market from Vietnam, as well as a huge stockpile of 200,000 tonnes from Thailand, have depressed NR prices this year.

This, in turn, has encouraged downstream tyre makers to switch to using more NR – up to the 10% allowance in their formulations – instead of PBR.

Downstream tyre makers have been insisting on lower BR prices, citing the slump in NR prices.

“There is no correlation between NR and PBR prices, as the main driver of the PBR price is the feedstock BD price. The PBR price should be de-linked from NR,” an Asian PBR maker said.

Some  downstream tyre makers have switched to using more NR in their formulations for tyres, but regional PBR producers are not keen to cut offers as they expect BD prices to increase soon after plummeting this month.

“The main raw material cost is BD, which we expect to rebound soon to $1,500/tonne CFR NE Asia, and we cannot run a business on  negative margins,” another PBR producer said.

Feedstock BD prices plunged by $275/tonne or 17% from end-July to $1,355/tonne CFR NE Asia on 22 August, according to ICIS data.

Market players expect BD prices to recover above $1,400/tonne CFR NE Asia soon, with South Korean BD producers unwilling to sell below this price.

Thailand’s huge NR stockpile has long been discounted by the PBR market, industry sources said.

“The sale of the 200,000 tonnes NR stockpile has already been digested by the market since it was announced by a senior minister in the previous Yingluck administration some time ago,” a rubber trader said.

Thailand, which is the world’s largest NR producer and exporter, now has its incumbent army chief Prayuth Chan-ocha as Prime Minister. Chan-ocha led the military coup on 22 May that deposed the country’s civilian government that was led by Yingluck Shinawatra.

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