Asia SBR uptrend may be capped as buyers resist higher offers

31 January 2018 05:19 Source:ICIS News

SINGAPORE (ICIS)--Price gains in Asia’s spot styrene butadiene rubber (SBR) market may be capped as downstream tyre makers are resisting higher offers, citing availability of cheaper alternative raw material, natural rubber (NR).

February spot offers for non-oil grade 1502 SBR were raised this week to $1,750-1,800/tonne CFR (cost & freight) southeast (SE) Asia on the back of rising costs of feedstocks butadiene (BD) and styrene monomer (SM).

On 24 January, the SBR grade was assessed at $1,600-1,700/tonne CFR SE Asia, up by $100/tonne from the start of the year, ICIS data showed.

“With NR hovering around $1,500/tonne now, tyre makers will not be willing to consider purchasing SBR at $1,800/tonne - it is way too expensive compared with NR,” a tyre maker said.

NR is a substitute feedstock to SBR in the production of tyres for the automotive industry, and tyre makers in the region have more flexibility in feedstock substitution in their product formulations.

 

“We have to revise our SBR 1502 offers up as we have no choice due to eroded margins from the higher feedstock costs,” an Asian SBR producer said.

On 26 January, spot prices of key feedstock BD stood at $1,350/tonne CFR northeast (NE) Asia, up by 15% since 22 December 2017, while SM prices had risen by 13% over the same period to $1,445/tonne CFR NE Asia, ICIS data showed.

But SBR prices may be weighed down by softening demand for spot cargoes ahead of the Lunar New Year holiday.

“We are getting fewer enquiries now as the Lunar New Year holiday is approaching,” a rubber trader based in Malaysia said.

The Lunar New Year, which is on 16 February this year, is celebrated in most parts of northeast and southeast Asia, with the key Chinese market due to be on holiday for a full week from 15-21 February.

“Demand will be really slow in February in China, as the tyre factories will mostly be running at below 50% capacity due to the holidays,” a Chinese SBR producer said.

Ample supplies of NR in China have also dampened buying sentiment for SBR.

“Tyre factories in China are holding about two months inventories of NR, so they are not in a rush to purchase more NR, which means that it will be difficult for the NR price to go up,” the Chinese SBR producer said.

Focus article by Helen Yan

Picture: Inside a tyre factory. Styrene butadiene rubber (SBR) is a raw material used on the production of tyres for the automotive industry. (Srouce: WestEnd61/REX/Shutterstock)

By Helen Yan