China SBR may extend falls on BD slump, shrinking demand

Styrene butadiene rubber (SBR) prices in China may continue heading south, tracking losses in rival product natural rubber (NR) and feedstock butadiene (BD) markets, with supply ample amid shrinking demand.

Spot offers for non-oil grade 1502 at above $2,700/tonne CIF (cost, insurance and freight) China were met with little interest, with the downstream tyre producers holding back purchases.

"SBR prices are falling but there are no buyers. The buyers are staying away," a Chinese trader said.

Demand for SBR has shrunk as tyre makers have adjusted their formulations to include more NR, the cheaper raw material alternative, in the composition of their product.

SBR and NR are substitute raw material in the production of tyres for the automotive industry.

NR prices fell below $2,000/tonne early this week, after fluctuating between $2,000-2,300/tonne in the past months. SMR20 tyre grade NR physical prices closed at 198.40 cents/kg ($1,984/tonne) on 8 March at the Malaysia Rubber Exchange.

"Several tyre makers have already switched to using more NR in their formulations, with some of them cutting back their monthly SBR consumption by about 50% due to the change in their formulations," a Chinese SBR producer said.

The continued slump in feedstock BD prices has also been weighing down on the SBR market.

On 3 March, spot BD prices tumbled by $300/tonne week on week to an average of $2,600/tonne CFR (cost and freight) northeast (NE) Asia, according to ICIS.

China's domestic BD prices had plummeted by about Chinese yuan (CNY) 7,000/tonne since mid-February to CNY19,400-19,700/tonne delivered on 7 March.

Meanwhile, traders currently have abundant SBR as well as NR stocks on hand and are hard-pressed to offload cargoes, exerting further downward pressure on the market.

Warehouses at Qingdao in China were heard well-stocked with materials that traders procured earlier from both regional and deep-sea suppliers.

To clear their stocks, Chinese traders are selling SBR to southeast Asia and India, given the sharp falls in China prices amid sluggish domestic demand.

"We are getting offers from China traders for Russia-origin SBR non-oil grade 1502 at $2,480/tonne CFR India," an Indian rubber distributor said.

Japan-origin SBR, meanwhile, were available this week at $2,700/tonne CFR southeast (SE) Asia, another trader said.

"We understand that the Japanese producers are clearing stocks before the financial year starts in April in Japan," he said.