Asia SBR may extend gains on BD rebound, restocking

Styrene butadiene rubber (SBR) prices in Asia are likely to rise further, buoyed by gains in the feedstock butadiene (BD) market and expectations that downstream buyers will start replenishing their stocks soon, industry sources said on Thursday.

Offers for fresh spot shipments were quoted on Thursday at $1,300-1,350/tonne CIF (cost, insurance and freight) China.

On 9 September, SBR non-oil grade 1502 prices were assessed at $1,230-1,270/tonne CIF China, up $20-30/tonne from the previous week, according to ICIS data.

Prices of feedstock BD rebounded to an average of $940/tonne CFR (cost and freight) northeast (NE) Asia on 4 September and are expected to rise further, after plunging 35% from early July to mid-August.

“Our margins had been eroded by the rising feedstock BD price, and SBR makers have no choice but to revise their offers up as previous SBR prices were too low,” an SBR producer said.

BD is a raw material for the manufacture of synthetic rubbers like SBR, which goes into tyres for the automotive sector.

Downstream tyre makers are expected to replenish their dwindling stocks of raw material in the near term, after months of procuring cargoes on a hand-to-mouth basis amid a slowing Chinese economy.

China is the world’s second-biggest economy and its largest automotive market. Concerns about its economic health has been roiling the global equities and commodities markets.

But a relative calm has been restored in the SBR market, leading to a pick-up in buying enquiries, traders said.

“We are getting more enquiries this week for fresh shipments and some buyers are even looking to buy more volumes not only for September but also October shipments,” a trader said.

Tyre makers also are considering switching to purchasing more spot volumes and cutting down on their contract cargoes, market sources said.

“SBR prices have bottomed out and buyers expect prices to go up, so they are coming in to buy more,” a trader said.

SBR supply, meanwhile, is expected to tighten in the near term, with the scheduled shutdown of a major facility in South Korea.

Korea Kumho Petrochemical Co’s (KKPC) 560,000 tonne/year SBR plant Ulsan is due to be taken off line for maintenance from 21 October to 8 November.