India SBR demand in doldrums on continued slump in auto industry

08:38' AM - Thursday, 12/09/2019

India’s demand for styrene butadiene rubber (SBR) is expected to remain in the doldrums in the near term because of continued slump in major downstream automotive industry.

Spot prices of non-oil grade 1502 SBR have remained flat at $1,300-1,350/tonne CFR (cost and freight) India since late July, ICIS data showed.

“It is worrying as there is no [buying] enquiry whatever the price,” an Asian SBR producer said.

SBR is a major feedstock in the production of tyres for the automotive industry.

India’s vehicle sales in August fell by 23.6% year on year to 1.82m units, while overall production declined by 18.5% to 2.3m units, industry data showed.

Passenger car sales plunged by 41.1% to 115,957 units, according to data from the Society of Indian Automobile Manufacturers (SIAM).

“The latest August car sales are the worst ever monthly drop in two decades and if demand does not recover, the synthetic rubber market will just spiral downwards,” a synthetic rubber trader said.

Limited liquidity, tight credit facility, high unemployment rates and weak consumer confidence have weighed down the automotive industry as consumers keep a tight rein on their purses amid an uncertain economic outlook.

The slump in the automotive industry has caused a pile-up in tyre inventories, prompting downstream tyre factories to run at lower rates.

“Let us hope the industry will pick up ahead of the Diwali holiday festive season in late October,” the trader added.

Diwali is the Hindu Festival of Lights, a major holiday in India.

Demand for consumer goods, including cars, usually starts to pick up in September ahead of the year-end holidays, but 2019 may be an exception given the weak economy and fears of a global recession.

“Let us keep our fingers crossed,” an SBR maker said in reference to a demand pick-up and hopes that a recession will be averted.

- ICIS -

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