US deep-sea SBR cargoes flow to Asia amid open arbitrage window

SINGAPORE (ICIS)–Deep-sea styrene butadiene rubber (SBR) cargoes from the US are expected to head into Asia amid restocking by Chinese buyers ahead of the Lunar New Year, market sources said on Thursday.

Chinese importers and traders have booked the cheaper deep-sea cargoes in recent weeks on expectations that prices will continue to increase before the week-long holiday in the country late next month.

The Lunar New Year falls on 28 January 2017.

Trading activities in the key Chinese market are expected to wind down from mid-January as players make preparations to leave for their home towns in the vast country, market sources said.

On 30 November, spot prices of non-oil grade 1502 SBR were assessed at $1,800-1,900/tonne CIF China , up by $80-120/tonne from the previous week, according to ICIS data.

Arbitrage cargoes from the US were heard available at around $1,700/tonne CIF (cost, freight and insurance) China, about $100-200/tonne lower than Asia-origin SBR, traders said.

“US-origin SBR are coming to Asia, and are expected to arrive in China in January or February next year,” a trader said.

It takes about four to six weeks for cargoes from the US to arrive in Asia, traders said.

The US-Asia arbitrage window is currently open, with US cargoes priced lower as the country enjoys low-cost feedstock advantage, market sources said.

“The US feedstock BD price is much lower compared to Asia BD costs, and this has spurred traders to bring in cheaper SBR from the US to Asia,” a trader said.

BD is a key feedstock in the production of SBR, which goes into the production of tyres for the automotive industry.

Spot BD offers in Asia are at $1,600-1,650/tonne CFR NE Asia, while in the US, four producers settled their December BD contracts at 52 cents/lb ($1,146/tonne). The US BD contract settlements are at least $400/tonne lower compared with Asian BD prices.

Focus article by Helen Yan

Top photo: Workers stack tyres onto a truck at a tyre factory in China. Styrene butadiene rubber (SBR) is a raw material for the production of tyres for the automotive industry. (Source: VIEW CHINA PHOTO/REX/Shutterstock)