SE Asia SBR may extend falls amid seasonal demand lull

SINGAPORE (ICIS)–Styrene butadiene rubber (SBR) prices in southeast Asia may continue to decline because of lacklustre demand amid ample supply, with market sentiment weighed down by weak crude prices, industry sources said on Friday.

On 20 July, non-oil grade 1502 SBR prices were assessed at $1,350-1,400/tonne CFR (cost and freight) southeast (SE Asia), down by $10/tonne from the previous week, ICIS data showed.

Demand is also typically sluggish in the month of July, market sources said.

Buyers posed strong resistance to spot offers of $1,400/tonne CFR SE Asia, citing flat prices of rival product natural rubber (NR).

SBR and NR are substitute raw material in the production of tyres for the automotive industry and their prices tend to move in tandem with each other.

SMR20 tyre grade NR, which is traded at the Malaysian Rubber Exchange, stood at $1,289/tonne on 20 July, little changed from the previous week.

“The natural rubber price is cheaper than SBR, so the downstream tyre makers are using the weak NR price to leverage for lower SBR prices,” a supplier said.

Tyre makers in emerging economies in Asia have more flexibility in formulation adjustments and raw material substitution, market sources said.

“The tyre makers are reluctant to lock in any large SBR volumes for July and are only buying on a hand-to-mouth basis, given the unclear and uncertain market outlook,” a trader said.

“Demand is soft in July due to the Muslim fasting month and Eid holiday. We expect the buyers to start serious negotiations next week as they are still in a holiday mood in Indonesia,” another trader said.

Trading and manufacturing activities had slowed significantly in the key Indonesian market in Southeast Asia during the month-long Muslim fasting period of Ramadan, which culminated in the Eid-ul-Fitr holiday on 6 July.

Indonesia has the world’s largest Muslim population and is a major production hub for the automotive and tyre makers.

Major SBR producers in Asia, however, are worried about their margins being eroded by rising costs of feedstock butadiene (BD), and hence were keeping offers at $1,400/tonne CFR SE Asia for July shipments of non-oil grade 1502.

Feedstock BD prices have increased by 12% since mid-June to $1,030/tonne CFR SE Asia on 15 July, according to ICIS data.

Focus article by Helen Yan

Picture: Newly made tyres at a storage in Anhui province in China (VIEW CHINA PHOTO/REX/Shutterstock)