Asia styrene butadiene rubber (SBR) prices are likely to weaken further in January 2015 because of ample supply, waning demand and plunging crude and feedstock costs, market sources said on Wednesday.
A slowing Chinese economy, abundant supply and waning demand have prompted Asian SBR producers to clear their surplus of non-oil grade 1502 SBR stocks at below $1,600/tonne CIF (cos, insurance and freight) China for January 2015 shipments, market sources said.
“Chinese demand is weak and buyers are pushing for lower prices at around $1,550/tonne CIF China for the non-oil grade SBR 1502 for January shipments,” market sources said.
“Market sentiment is very bearish, with the upstream crude and feedstock styrene monomer (SM) costs falling sharply recently, this is pushing down the SBR spot prices to below $1,600/tonne CIF China,” a trader said.
Spot non-oil grade 1502 SBR prices averaged $1,625/tonne CIF China on 10 December, down by about 5% since the end of November, according to ICIS.
Feedstock SM prices have plunged by about 25% since the end of November to around $850/tonne CFR (cost and freight) northeast (NE) Asia on 12 December, ICIS data showed.
Feedstock BD values have also weakened during the same period to around $950/tonne CFR NE Asia on 12 December, down by 5% since 28 November, ICIS data showed.
Meanwhile, the steep falls in US crude and Brent futures, which have almost halved since June, have weighed on market sentiment, market sources said.
On 16 December, January Brent closed the day down $1.20/bbl at $60.01/bbl, having traded a range between $58.50/bbl and $61.25/bbl.
January West Texas Intermediate (WTI) closed the day up 2 cents/bbl at $55.93/bbl, having traded a range between $53.60/bbl and $57.15/bbl.
Chinese demand for SBR has also waned as downstream tyre producers have been running their plants at reduced rates, amid a slowing Chinese economy and concerns over the proposed US anti-dumping duties on Chinese tyre imports in 2015.
“Several downstream tyre producers in Shandong province in China are running their plants at reduced rates because of prevailing weak domestic demand and worries over the proposed US anti-dumping duties,” a Chinese SBR producer said.
The US is a major export market for Chinese tyre makers.
The US Commerce Department and International Trade Commission (ITC) are conducting anti-dumping duty investigations on certain Chinese passenger vehicle and light truck tyre imports, with preliminary findings expected in January.
Meanwhile, Chinese domestic SBR prices continued to weaken amid a slowing Chinese economy as Chinese factory output fell in December.
On 16 December, Chinese domestic non-oil grade SBR 1502 prices were at yuan (CNY) 9,500-10,300 EXWH east china, down from CNY 10,500-11,400/tonne EXWH on 28 November, according to Chemease, an ICIS service in China.
The flash HSBC purchasing managers’ index (PMI) dipped to a seven-month low of 49.5 from a final reading of 50 in November. A PMI reading above 50 indications an expansion while a reading below 50 denotes a contraction in manufacturing activities.