Global emulsion styrene butadiene rubber, or SBR, prices were resisting a decline in feedstock costs as European and Chinese producers slashed operating rates amid weak demand and a switch to cheap natural rubber, sources said this week.
European 1502 spec spot prices have held stable through July at Eur1,430/mt FD NWE and were expected to stay at these levels through most of August, a typically quiet month as supply was considered tight. On the other hand, the FOB Rotterdam butadiene price was assessed at $1,240/mt Thursday, down $5/mt from August 1.
In Asia, the CFR Northeast Asia SBR 1502 grade price was hovering at $1,980/mt early Friday, up $10/mt week on week. The CFR China butadiene price benchmark was hovering at $1,505/mt, $55/mt lower than a week earlier.
Despite this, Asian SBR producers are suffering negative margins as they typically need a $550-600/mt margin to break even.
RUN CUTS TIGHTEN SBR SUPPLY
Market sources said synthetic rubber supplies in Asia were tight due to lower plant operations amid negative margins, which, at the same time, created excess butadiene supply.
For example, South Korea’s Kumho Petrochemical cut operating rates of its synthetic rubber plants from August, which reduced its butadiene consumption by 20,000 mt for August-September.
China’s Shen Hua is running its 180,000 mt/year SBR plant at 60% capacity, while it will shut its 72,000 mt/year BR plant in September.
In Taiwan, TSRC plans to shut its 60,000 mt/year butadiene-rubber plant at Tashe in southern Kaohsiung from the end of August for two weeks of annual maintenance. The company has a 100,000 mt/year styrene-butadiene-rubber unit at the same location, which is currently running at around 70% of capacity due to weak margins.
Europe is in a similar situation, with Russian and European SBR producers have lowered operating rates in the first half of the year as global demand dropped off.
Lower synthetic rubber runs were also triggered by weak tire demand. In China, some sources said that tire maker operating rates had as low as 30%.
DOWNTURN EXPECTED IN NEAR TERM
Looking forward, lower European spot butadiene prices in August were expected to be reflected in the September contract price, meaning reduced costs, sources said.
In addition, tire makers had also switched as much synthetic rubber capacity as they could to cheaper natural rubber, which slashed demand for synthetic rubber.
“The situation didn’t look part good going into the holiday period,” a global tire maker source said.
“[There’s] no indication that China will turn things around,” the source said. “Much the same globally. There’s uncertainty about the Q4 performance part for the truck side, which is less important for synthetic rubber. Car and light vehicle is uncertain.”
Asian market sources echoed that outlook.
“Synthetic rubber demand from China is not very strong. But the Asian SBR market is seen to be firm currently because of tight supplies,” said a Korean SBR producer. “But if weak butadiene market continues, the Asian SBR market would likely follow that.”
– Platts.com
