Downstream Demand Holds Key for US SBR Prices Amidst Long Supply

Texas (USA)- Styrene Butadiene Rubber (SBR) prices in the US market remained stable following a continuous incline through the end of June 2024. Final SBR prices are determined by the balance between supply and demand, as well as production costs. Over the past week, prices of key SBR feedstocks, styrene and butadiene, exhibited volatility amid ongoing price competition and government initiatives to boost consumption in the world’s largest electric vehicle market. However, cautious purchasing behaviour for high-cost goods downstream has resulted in a stable performance in the SBR market. As of the week ending June 28, 2024, SBR prices in the US market stood at USD 2,140 per MT, CFR USGC.

Car dealerships across North America continue to grapple with significant disruptions that began last week due to cyberattacks on a key software provider for the auto retail industry. CDK Global, a company supplying software to thousands of auto dealers in the US and Canada, suffered consecutive cyberattacks, resulting in an ongoing outage affecting their operations. For potential car buyers, this has translated into delays at dealerships and manual processing of vehicle orders, temporarily halting SBR inquiries.

Despite ongoing challenges from high prices and interest rates, recent forecasts suggest a cautiously optimistic outlook for the automotive market. Incentives are increasing, providing some relief for vehicle buyers, but only marginally. The expectation of declining prices, combined with growing uncertainty around interest rate policies, may cause some buyers to delay their purchases of SBR in the derivatives market.

Dockworkers on the East and Gulf coasts of the US have threatened to strike, while longshore workers at German ports have stopped working in a bid for higher wages. In Canada, rail workers are on the verge of walking off the job, jeopardizing cargo transport across North America and risking congestion at key ports. Market dynamics have undergone a significant shift due to capacity shortages and rising freight rates, reminiscent of the pandemic period. This trend has continued, with spot rates increasing and carrier bookings reaching high levels. This was not a minor fluctuation but a development that caught both carriers and shippers off guard, underscoring the volatility of the maritime sector.

Further stagnation in SBR prices is expected in the US market amidst tight supply. Vehicle inventory levels are rising, incentives are increasing, and there is mounting uncertainty regarding the economy and interest rates. These factors may motivate consumers to place higher orders, yet SBR manufacturers may consider the opposite in the upcoming weeks.