SINGAPORE (ICIS)–Butadiene (BD) spot prices in Asia may be near peak as the downstream synthetic rubber producers retreated to the sidelines following a surge in offers to $1,550/tonne this week.
Traders snapped up two sales tenders earlier this week at considerably high prices, prompting offers to subsequently hit $1,550/tonne CFR (cost & freight) NE (northeast) Asia this week.
“We cannot accept BD price at $1,550/tonne CFR NE Asia, it is not workable,” a major downstream synthetic rubber producer said.
The sales tender deals, with the equivalent of $1,500-1,520/tonne CFR NE Asia basis, evoked surprise from market players, including a major BD producer, who considered these deals as not representative of the broader market.
“Spot offers at $1,450/tonne CFR NE Asia would be considered more representative of the current market,” the BD producer said.
Synthetic rubber producers including styrene butadiene rubber (SBR) and polybutadiene rubber(PBR) makers are major consumers of BD and have hiked the SBR and PBR prices to keep their margins, which have been wiped out by the BD price surge.
However, the SBR and PBR producers have hit a brick wall as their major customers, the tyre makers, are resisting any significant hike in the SBR and PBR prices because of falling natural rubber (NR) prices.
At mid-day on 3 July, SMR 20 tyre grade natural rubber prices were at $1,492/tonne FOB (free on board) Malaysia, down from $1,630/tonne FOB Malaysia on 3 June at the Malaysian Rubber Exchange.
NR and SBR and PBR prices tend to move in tandem with each other as they are substitutes for each other in the production of tyres for the automotive industry.
Tyre makers in emerging economies in Asia have more flexibility in raw material substitution in their formulations.
Non-oil grade 1502 SBR prices averaged $1,550/tonne CIF (cost, freight and insurance) China on 1 July, ICIS data showed.
A spread of about $450/tonne is required between BD and SBR, market sources said.
“The BD price is now the same as SBR price, how can this work?” a trader asked.
– icis.com
