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 EUR 1,430/metric ton 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/metric ton Thursday, down $5/metric ton from August 1. In Asia, the CFR Northeast Asia SBR 1502 grade price was hovering at $1,980/metric ton early Friday, up $10/metric ton week on week. The CFR China butadiene price benchmark was hovering at $1,505/metric ton, $55/metric ton lower than a week earlier.
Despite this, Asian SBR producers are suffering negative margins as they typically need a $550-600/metric ton margin to break even. 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 metric tons for August-September.
China’s Shen Hua is running its 180,000 metric tons/year SBR plant at 60 percent capacity, while it will shut its 72,000 metric tons/year BR plant in September. In Taiwan, TSRC plans to shut its 60,000 metric tons/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 metric tons/year styrene-butadiene-rubber unit at the same location, which is currently running at around 70 percent 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 percent.
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 fourth quarter performance part for the truck side, which is less important for synthetic rubber. Car and light vehicle is uncertain.” “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.” –