Market and product

Polybutadiene rubber (PBR) prices in Asia are likely to remain soft as supply continues to outstrip demand amid the economic slowdown in China and southeast Asia, market sources said on Tuesday.

On 22 October, spot prices of high-cis PBR fell to an average of $1,175/tonne CFR (cost and freight) northeast (NE) Asia and CFR southeast (SE) Asia, down by $25/tonne from the previous week, ICIS data showed.

“Demand is soft and there is too much supply,” a trader said.

Fresh supply hit the market with the recent start-up of two new PBR plants in southeast Asia – Lotte Ube Synthetic Rubber’s 50,000 tonne/year plant in Malaysia and Lanxess’ 140,000 tonne/year neodymium Nd-PBR plant in Singapore – dampening buying sentiment.

The new PBR plants are running at reduced rates, given the prevailing weak market conditions, market sources said.

Suppliers had to cut their offers to compete for business in a tough market environment, they said.

Exacerbating the situation is the weak global tyre market, the major downstream for PBR.

Tyre makers in Asia have reduced production, consequently easing their demand for raw material PBR.

“The tyre factories are running at reduced rates in China due to the weak domestic and export tyre markets,” a Chinese producer said.

Declining automotive production in a slowing Chinese economy had weighed on demand for PBR

China, which is the world’s second-biggest economy and its biggest automotive market, posted third-quarter annualised GDP growth of 6.9% - the slowest quarterly expansion in six years.

Its vehicle output in September fell 5.6% year on year to 1.89m units, while its total vehicle production for the first nine months of 2015 was down 0.8% at 17.09m units, according to the China Association of Automobile Manufacturers (CAAM).

For regional PBR producers, however, prices should not fall further as their margins are being eroded.

“There is little room for the PBR price to fall lower as our margins have been wiped out,” a northeast Asian PBR producer said.

“We need a spread of at least $500/tonne between the feedstock butadiene (BD) and PBR, but the spread is now only $400/tonne, which has wiped out our margins,” he said.

BD spot prices averaged $800/tonne CFR NE Asia last week, ICIS data showed.