VINACHEM

Styrene butadiene rubber (SBR) prices in India look set to fall, dragged down by continued slump in the feedstock butadiene (BD) market, amid abundant stocks and tepid demand.

Downstream tyre makers in the country have retreated to the sidelines, holding back their purchases for this month, which marks the end of India's fiscal year.

Spot offers for SBR non-oil grade 1502 at $2,800-2,900/tonne CFR (cost and freight) India were met with little interest.

On 1 March, SBR prices were assessed stable for the second consecutive week at an average of $2,800/tonne CFR India, following a 62% surge from late November 2016, according to ICIS data.

Feedstock BD prices, meanwhile, tumbled $300/tonne week on week to an average of $2,600/tonne CFR NE Asia on 3 March, the data showed.

Falling prices of rival product natural rubber (NR) further exerted downward pressure on SBR prices, market sources said.

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

NR prices have been fluctuating in the $2,000-2,300/tonne range, much lower than the current SBR prices, encouraging tyre makers to adjust their formulations to include more NR.

“We will only purchase on a need-to basis and will wait and see as the feedstock BD price is falling and NR is cheaper,” a tyre maker said.

Tyre makers in emerging economies in Asia have more flexibility in changing their formulations for production.

“We can wait and will not build up our SBR stocks for March as it is the end of the fiscal year in India,” another tyre maker said.

India’s SBR demand typically weakens in March as tyre manufacturers are unwilling to build up their stocks before the new fiscal year starts.

Availability of cheaper deep-sea material from Europe and Russia has also been weighing down on demand for Asia-origin SBR.

“We have quoted them offers at $2,800/tonne CFR India for European SBR non-oil grade 1502, but there is limited buying interest,” a rubber distributor said.

Meanwhile, traders in China with SBR stocks on hand were heard unloading their surplus cargoes in India due to weak Chinese demand.

“China traders are offering Russian SBR 1502 at below $2,500/tonne CFR India, but we will wait and see as market sentiment is weak for March, given that it is a fiscal year-end,” an Indian trader said.

Despite lackluster demand in India, major Asian SBR producers are maintaining high offers for fresh spot shipments.

“We will not sell SBR 1502 at below $2,900/tonne CFR India for March cargoes due to eroded margins from high feedstock BD costs in February,” an Asian SBR maker said. - ICIS