Asia SBR tumbles on oversupply, slump in Chinese demand

SINGAPORE (ICIS)–Styrene butadiene rubber (SBR) prices in Asia are on a downward spiral as sellers are cutting offers to clear their stocks in an oversupplied market, market sources said on Tuesday.

Some sellers were diverting cargoes to India amid slumping demand in China, they said.

Spot offers for non-oil grade 1502 SBR for fresh August shipments fell to $1,250-1,300/tonne CFR (cost and freight) India and CFR SE (southeast) Asia this week, down $300/tonne from early July.

On 29 July, SBR prices were assessed at $1,350-1,400/tonne CFR SE Asia and CFR India, down $50/tonne from the previous week, according to ICIS data.

“It looks like SBR prices are in free fall now, with offers for non-oil grade 1502 dropping quickly and even faster than the feedstock butadiene (BD),“ a trader said.

Prices of feedstock BD have plunged 28% over the month of July to average $1,025/tonne CFR NE (northeast) Asia, ICIS data showed.

BD is a raw material for the production of synthetic rubbers like styrene butadiene rubber (SBR), which go into tyres for the automotive market.

China, a key market for SBR, is the world’s largest automotive market but vehicle sales in the country have been falling, while its overall manufacturing sector is slowing down based on recent data.

The country’s official purchasing managers’ index (PMI) in July showed a reading of 50.0, the threshold separating expansion from contraction in factory output, and down from 50.2 in June. 

Chinese media group Caixin and financial information service provider Markit also issued their final July China PMI reading that showed a more downbeat reading of 47.8 – a two-year low.

Concerns about economic weakness in China and the US – the world’s two biggest economies – sent crude prices tumbling overnight.

At midday, US crude was at above $45/bbl, while Brent crude was trading below $50/bbl.

“Chinese demand [for SBR] has slowed down and suppliers and traders are unloading and diverting their surplus stocks to India and southeast Asia,” a trader based in southeast Asia said.

In India, competition was also heating up as suppliers were heard cutting offers to maintain their share in the price-sensitive market.

“Chinese demand is weak, so traders and producers are channelling their attention and diverting their stocks to India,” an India-based rubber trader said.

India “is going to be a battleground” for European and Asian SBR producers, another trader said.

“Indian producers will want to build up their [domestic] market share, and one way is to cut prices to keep out the competition,” the trader said,

Indian Synthetic Rubber Ltd (ISRL) and Reliance Industries Ltd (RIL) are relative newcomers to the SBR market, with facilities in operation only for at least a year.

Focus article by Helen Yan

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