Asia SBR may face more downward pressure on likely ease in NR supply

SINGAPORE (ICIS)–Asia styrene butadiene rubber (SBR) prices may face more downward pressure in the coming weeks as buyers hold back their SBR purchases because they expect an ease in natural rubber (NR) supply and lower NR prices, market sources said.

NR is a rival product and substitute for SBR and their prices tend to impact on each other, market sources said.

“We will only start to buy SBR when more NR supply comes into the market in the coming weeks, and NR prices start to fall, as this will give us leverage in the SBR negotiations,” a buyer said.

Non-oil grade 1502 SBR prices fell in Asia this week as the downstream tyre makers retreated to the sidelines amid the seasonal lull in demand and cut back their purchases, market sources said.

Non-oil grade SBR 1502 prices fell to $1,280-1,330/tonne CFR (cost and freight) India on 17 August, down by $20/tonne from the previous week, ICIS data showed.

The tapping of NR is expected to gather pace in the coming weeks, after the heavy rains subside and the monsoon season ends, market sources said.

The monsoon season in India usually starts from June and ends in September.

Tyre makers in the emerging economies in Asia have more flexibility in raw material substitution in their formulations for the production of tyres for the automotive market, market sources said.

“NR prices have been hovering around $1,300/tonne and consumers of SBR are not prepared to pay higher than $1,350/tonne CFR for non-oil grade 1502 SBR in southeast Asia,” a trader said.

SMR20 tyre grade NR prices averaged $1,280/tonne in July and now average  $1,330/tonne FOB (free on board) Malaysia from 1-17 August, at the Malaysian Rubber Exchange.

In the meantime, non-oil grade 1502 SBR prices fell by $30/tonne to $1,300-1,350/tonne CFR southeast (SE) Asia on 17 August, ICIS data showed.

Demand in China has also slowed during the hot summer as the downstream tyre factories usually reduce their operating rates during this lull period, market sources said.

Spot appetite for SBR imports into China has also receded as buyers have earlier procured sufficient stocks to cover their requirements ahead of the G20 Summit in Hangzhou on 4-5 September, market sources said.

The Chinese government has issued a directive to factories and petrochemical plants in the Shanghai and Ningbo areas to cut their operating rates or shut down their plants from mid-August for about three weeks as part of its measures to improve air quality during this period.

Several SBR producers in China including Hangzhou Zhechen Rubber and Shen Hua Chemicals have shut down their SBR plants from mid-August in the run-up to the G20 Summit.

“Traders and the downstream tyre makers in China have earlier built up their SBR inventories ahead of the G20 Summit, and demand for SBR import cargoes also usually slows down during the hot summer months” a Chinese SBR supplier said.

Non-oil grade 1502 SBR prices fell to $1,300-1,350/tonne CIF (cost, freight and insurance) China on 17 August, down by $20-30/tonne from the previous week, ICIS data showed.

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

Focus article by Helen Yan