Asia PBR may extend gains on rising BD cost, restocking

SINGAPORE (ICIS)–Asia’s polybutadiene rubber (PBR) prices are facing upward pressure from rising cost of feedstock butadiene (BD) cost and amid re-stocking activities ahead of the Lunar New Year holidays.

PBR is a raw material for tyres used in trucks. (Source: Imagine China/REX/Shutterstock)

Spot offers for high-cis PBR were revised up to $1,700-1,800/tonne CFR (cost and freight) northeast (NE) and southeast (SE) Asia, market sources said.

On 10 January, high-cis PBR prices were assessed at $1,625/tonne CFR NE Asia, up by $25/tonne from the previous week, ICIS data showed.

“We have to revise our PBR offers higher in line with the rising feedstock BD cost due to margin erosion,” a regional synthetic rubber maker said.

A spread of about $500-600/tonne between the feedstock BD and PBR is required for the PBR makers to break even.

Spot prices of feedstock BD had increased by $70/tonne or 6% since late November 2018 to $1,195/tonne CFR NE Asia on 11 January 2019, ICIS data showed.

“We expect enquiries for PBR to pick up as customers re-stock their inventories before they leave for the Lunar New Year holidays,” a rubber trader said.

The Lunar New Year falls on 5 February and is celebrated in several countries in Asia, including China, South Korea, Taiwan, Indonesia, Singapore, Malaysia and Vietnam.

In China, downstream tyre makers are expected to resist any sharp increase in PBR prices given that the automotive industry has remained sluggish amid a slowing Chinese economy and the country’s ongoing trade tensions with the US.

“The tyre makers in China will run at below 30% capacity during February because of the Lunar New Year holidays, and demand for PBR is expected to slow down due to falling sales and production in the Chinese automotive market,” a China-based PBR producer said.

Buyers are cautious and are adopting a wait-and-see stance, given uncertainties over the US-China trade war, and slowing automotive market in China, another rubber trader said.

China is the world’s largest automotive market and its declining automotive sales and production has hit demand for PBR, a major raw material in the production of tyres.

“We keep lean inventories and buy on a need-to basis, it is less risky,” a downstream tyre producer said.

China’s automotive market suffered its first slump in over two decades in 2018, with total sales posting a 2.8% decline to 28.08m units, with total vehicle production down 4.2% at 27.8m units,  according to data from the China Association of Automobile Manufacturers (CAAM).

Sales of passenger cars last year decreased by 4.1% to 23.71m units, while production of such models dropped by 5.2% to 23.53m units.

CAAM expected the market would see zero or tepid growth this year amid economic challenges.

Focus article by Helen Yan

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