Asia SBR may extend slump on falling BD prices, weak demand

19 April 2017 05:50 Source:ICIS News

China car manufacturing plant 19 April

SINGAPORE (ICIS)--Spot styrene butadiene rubber (SBR) prices in Asia look set to fall lower as downstream tyre makers are staying on the sidelines amid plummeting feedstock butadiene (BD) values.

Spot offers for non-oil 1502 have declined by $100/tonne this week to $2,100-2,200/tonne CFR (cost and freight) southeast (SE) Asia, they said.

On 12 April, spot SBR prices were assessed at an average of $2,250/tonne CFR SE Asia, shedding 23% from mid-February, largely due to the slump in feedstock BD values, according to ICIS data.

Prices of feedstock BD have plunged by 55% from early February to $1,325/tonne CFR NE (northeast) Asia on 14 April, the data showed.

Notwithstanding the sharp decline in SBR prices, buying interest has remained tepid as downstream tyre makers have adopted a wait-and-see stance on the market, expecting prices to weaken further.

BD is a raw material for the production of synthetic rubbers like SBR, which go into tyres for the automotive industry.

“SBR sales have been very slow as the buyers are closely watching the feedstock BD price, which seems to be still under downward pressure,” an Asian SBR maker said.

Most market players are expecting SBR prices to fall below $2,000/tonne CFR SE Asia.

“The tyre makers are very hesitant to lock in any large volumes, they are just buying small parcels on a need-to-basis as they expect the SBR prices to drop below $2,000/tonne CFR SE Asia,” a rubber distributor said.

Compounding the market pressure is the price weakness in rival product natural rubber (NR).

“NR price has dropped to around $1,550/tonne while the feedstock BD price is still under pressure to fall, so tyre makers are waiting for the SBR price to fall below $2,000/tonne,” a trader said.

NR and SBR can substitute each other as raw material in tyre production.

Tyre makers in the emerging economies of China and India have more flexibility in feedstock substitution in their product formulation.

“It is very difficult to sell SBR now as it is a buyers’ market, and buyers are just holding back their purchases,” another SBR supplier said.

In China and India, which are major production hubs for tyre makers, SBR prices have been falling faster.

“We hear that offers for non-oil grade 1502 SBR have dropped to $1,950/tonne CIF China and CFR India,” another trader said.

Chinese domestic SBR non-oil grade 1502 prices this week stood at around yuan (CNY) 13,000/tonne ($1,890/tonne) ex-works, down by about 30-35% compared with early March, a Chinese rubber trader said.

“We will import less SBR as domestic SBR prices are so much cheaper and easily available,” said a major tyre maker based in China.

China is the world’s largest automotive market, while India is an emerging market for major automotive makers.

In March, China’s vehicle production grew 3% year on year and 20.6% month on month to 2.6m units, while India’s overall vehicle output rose by 4.96% year on year to 2.25m units, 77% of which are two-wheelers, according to industry data.

An Indian tyremaker has been buying smaller volumes of 200-300 tonnes on a weekly basis on expectations of a further softening in prices.

"We are just buying little quantities to keep safety stocks. NR is falling every day, so [we] expect SBR 1502 to drop to around $1,900 CFR India," the tyremaker said, adding that prices could fall to as low as $1,600/tonne by end-May.

Asia SBR 19 April

Focus article by Helen Yan

($1 = CNY6.88)

Picture (top): Car manufacturing plant in China's Heilongjiang province. Styrene butadiene rubber (SBR) is a raw material in the production of tyres for the automotive industry. (Source: ImagineChina/REX/Shutterstock)

By Helen Yan