OUTLOOK ’18: Asia SBR prices to rise in January on re-stocking ahead of Lunar New Year

SINGAPORE (ICIS)–Asia styrene butadiene rubber (SBR) prices are expected to rise further in early 2018 because of higher feedstock butadiene (BD) costs and re-stocking activities.

Major Asian SBR producers have hiked offers for January shipments of non-oil grade 1502 to $1,650-1,750/tonne CFR SE Asia, on expectations that the feedstock BD price will continue to be on an uptrend in early 2018.

December trades of non-oil grade 1502 SBR have mostly been completed at $1,550-1,650/tonne CFR (cost and freight) southeast Asia.

“We anticipate the feedstock BD price to go up prior to the Lunar New Year, so we have to revise our SBR offers higher for January cargoes,” an Asian SBR producer said.

The key feedstock BD price has rallied to around the $1,175/tonne CFR northeast (NE) Asia level in mid-December and is expected to rise further in early 2018 due to re-stocking activities ahead of the Lunar New Year holidays.

Lunar New Year falls on 16 February in 2018 with countries in Asia including China, South Korea, Taiwan, Singapore and Malaysia celebrating the festive holidays.

The key China market is usually shut for about a week for the festive holidays.

Chinese demand for commodities including BD and SBR is expected to pick up ahead of the week-long holidays.

“China usually sees a strong appetite for commodities, as traders and consumers build their inventories in the run-up to the Lunar New Year, so we expect prices to continue to go up into January and early February in 2018,” a trader said.

In light of this seasonal spurt in increased buying interest prior to the Lunar New Year holidays, the natural rubber (NR) price is also expected to rise.

Market expectations of higher NR price will also add to the upward pressure on SBR.

NR and SBR are rival feedstocks for the production of tyres for the automotive industry and their prices tend to move in tandem.

“The tyre makers will have to come back to the market in early January to re-stock both their NR and SBR inventories for the first quarter, so it is likely that the SBR prices in  Asia will continue to rise in early 2018,” a trader said.

Outlook article by Helen Yan