A disconnect between the European, US and Asian styrene-butadiene rubber markets has emerged which could see European supply tighten amid an increase in exports to Asia, market sources said.
With Asian emulsion SBR prices rising on a combination of firm butadiene and natural rubber and improved SBR demand, and European prices stagnant, sources said European suppliers could soon export monomer butadiene and SBR to Asia, if prices there continued to rise.
Asian butadiene prices were assessed at $1,980/mt CFR China, while ESBR 1502 was assessed at $2,550/mt CFR NE/SE Asia, up from around $2,350/mt at the start of the month, according to Platts data.
A producer source said October ESBR contracts were expected to see a decrease of around Eur100 to around Eur2,050/mt FD NWE, while oil-extended 1723 contracts would fall by around Eur50-75, or at a discount of around Eur100/mt below the 1502 grade.
A trader estimated that given the CFR Asian prices, FOB Rotterdam spot prices should be pricing at Eur2,100/mt, or at least $2,700/mt or as much as $2,850/mt FOB Rotterdam.
However, sources have said in September that 1502 ESBR spot prices were pricing at least Eur100 below monthly contract levels.
"European and US suppliers have a huge incentive to ship material to Asia," a European trader said.
However, at the same time he warned: "It depends how much can be put in the water. A considerable amount was required."
As to the regional dissconnect, a producer said: "Asia is not connected with European (bearish) trends. In the US, original equipment [OE] tires are doing well but replacement tires are not doing so good, perhaps flat at best."
"Why are they not doing well? Perhaps because of the high price of oil," the producer said.
"In Asia, both market components are positive. However, this year in Europe OE and replacement in Europe is down 5 to 6% compared to 2011," he said.
The producer felt the tightness in Asia would also also help to tighten the market in Europe, with either less material coming from Asia or the result of more material being shipped there, and this would have an impact on the spot market.
"I believe that the spot discount to the contract price will narrow due to the increases in Asian butadiene and SBR prices, as less spot material becomes available in Europe," the producer said.
Sources said stock levels in Europe are already 50% below normal levels as participants sought to control their logistical systems.
"They have been reducing stocks to improve cash-flow and dwindling business. As a soon as there is an improvement then everyone will rush to fill the supply chain," the producer said.
However, some sources were not optimistic that this would happen any time soon in Europe.
"I was talking to a producer and he said that in Asia and the US he was optimistic about growth next year but in Europe it may take three years before we get to levels seen in 2011. That is one hell of a statement about the state of the European market," he said.
