Chinese SBR demand weakens on slump in auto sales, slowing growth

Chinese demand for styrene butadiene rubber (SBR) has weakened because of falling automotive sales, weak market conditions and slowing growth.

On 12 June, spot prices for non-oil grade 1502 fell by $50/tonne week-on-week to $1,300-1,350/tonne CIF (cost, freight and insurance) China.

Spot interest for SBR imports has slackened, with the downstream tyre makers holding back on re-stocking due to high inventories and weak market conditions.

"There is no spot interest as Chinese tyre makers have high inventories and with the slump in automotive sales, demand for SBR has weakened," a Chinese rubber trader said.

China’s car market weakened further in May, with sales down by 16.4% year on year and 3.4% month on month to 1.91m units, data from China Association of Automobile Manufacturers (CAAM) showed on 12 June.

SBR is a raw material used in the production of tyres for the automotive industry.

"Chinese demand for SBR is expected to remain weak due to the poor market sentiment and the US-China trade war. Furthermore, tyre companies usually run at lower rates during the hot summer months of July and August," a Chinese SBR producer said.

The International Monetary Fund (IMF) said on 5 June that economic growth in China is expected to moderate to 6.2% in 2019 and 6.0% in 2020, as uncertainty around trade tensions remain high and risks are tilted to the downside.

The expected growth for 2019 was lower than the previous forecast of 6.3%, but within China's own target of 6.0-6.5%.

The US and China have been locked in a trade war since July 2018, which recently escalated following an apparent collapse of high-level negotiations between the world's two biggest economies.