India SBR may halt price downtrend on rising BD costs

Focus article by Helen Yan

SINGAPORE (ICIS)–Styrene butadiene rubber (SBR) prices in India may be propped up by rising costs of feedstock butadiene (BD) although the market is awash with supply, market players said on Friday.

On 20 May, non-oil grade 1502 SBR prices fell to an average of $1,350/tonne CFR (cost and freight) India, down by 5.3% from 6 May, according to ICIS data.

Prices have been falling because of ample supply from local SBR producers, Indian Synthetic Rubber Ltd (ISRL) and Reliance Industries Ltd (RIL), and amid an influx of deep-sea material from Europe, market sources said.

“The local Indian SBR producers are offering very competitive rates to the Indian tyre makers as they are trying to build up their market share in India,” a downstream Indian tyre producer said.

ISRL’s 120,000 tonne/year SBR plant in Panipat and RIL’s 150,000 tonne/year SBR plant in Hazira came on stream in 2014.

Spot offers for domestic and Europe-origin material are about $100/tonne lower compared with those for SBR from Asia, market sources said.

Major Asian SBR producers have raised their offers for non-oil grade 1502 SBR to a minimum of $1,550/tonne CFR India for fresh June shipments, on expectations of higher feedstock BD costs.

“We have to increase our offers for the non-oil grade 1502 SBR to more than $1,550/tonne CFR India or we will have negative margins, as we expect the feedstock BD costs to go up higher to $1,200/tonne CFR NE Asia,” a major northeast Asian SBR producer said.

Feedstock BD costs averaged $1,075/tonne CFR NE Asia in the week ended 15 May, up by 20% since early April, ICIS data showed.

BD prices are expected to rise further in the near term amid tight supply in Asia due to cracker turnarounds, and with the arbitrage window from Europe and the US to Asia currently shut, market players said.

“The tyre makers in India have the advantage of being able to procure cheaper local Indian material, as well as European and even Iranian products, which are all priced much lower than Asia-origin SBR,” said a Indian trader.

Asian SBR producers have been facing mounting competition from European SBR producers, which can offer lower prices to India as they enjoy comparatively lower BD costs.

On 15 May, spot BD prices in Europe averaged $675/tonne FOB (free on board) ARA (Amsterdam, Rotterdam, Antwerp), which is $400/tonne lower than Asian BD prices, according to ICIS data.

The recent collapse of the Russian rouble and depreciation of the euro against the US dollar have also made SBR from Europe very attractive to the Indian market.

“It is very tough to compete in the price-sensitive Indian market as the Indian tyre makers can source their cargoes from many suppliers in both Europe and Asia, as well as their own local producers,” an Asian SBR producer said.

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