VINACHEM

SINGAPORE (ICIS)--Indian styrene butadiene rubber (SBR) prices surged past $4,000/tonne (€2,760/tonne) this week and look set to remain firm in May as supply is tighter than expected, industry sources said on Thursday.

Spot prices for non-oil grade 1502 spiked $200/tonne week on week to $4,000-4,100/tonne CFR (cost & freight) India on 20 April, ICIS data showed.

“SBR prices have risen above $4,000/tonne and are likely to remain firm in the second quarter because of tight supply,” said an India-based tyre producer.

Heavy turnaround schedule at regional plants this quarter constrains SBR availability, which is aggravated by supply disruption in Japan and limited material coming from Europe, traders said.

TSRC Corp in Taiwan; Zeon Corp in Japan; and Bridgestone Huizhou Synthetic Rubber, Lanzhou Petrochemical and Gaoqiao Petrochemical in China have scheduled maintenance at their SBR plants in April and May.

“The tyre producers are building up inventories as they fear that prices may still rise, given tight SBR supply,” a northeast Asian SBR producer said.

In Japan, a number of SBR plants have shut operations or cut production in the wake of the massive 9.0-magnitude earthquake and tsunami that struck the northeastern part of the country on March 11.

The resulting shortfall in domestic SBR supply in Japan prompted other Asian producers to step in to provide the material, shaving the volumes available for India.

“We have received enquiries from some tyre producers in Japan. Their suppliers in Japan were not able to deliver their contract cargoes because of power outages and extensive damage to infrastructure after the earthquake,” said a Korean SBR producer.

To meet the shortfall in the Japanese market, Korean SBR producers have reduced their volume offers to India.

Dwindling SBR supply from Europe is also compounding the problems for Indian tyre producers, which has a strong requirement for the material amid a booming domestic automotive industry.

India’s car sales jumped 30% to 1.98m units in the fiscal year ending March 2011, according to media reports.

SBR is a raw material used in the manufacture of tyres for the automotive industry.

“The SBR market is turning more bullish as there is no spot cargo from Europe because of the tight butadiene supply in Europe,” said an India-based trader.

Butadiene (BD) is the feedstock for SBR. BD supply in Europe has tightened because of a spate production issues and cracker outages.