31 December 2009 16:38 [Source: ICIS news]
HOUSTON (ICIS news)--The US styrene butadiene rubber (SBR) sector went through a calamitous drop in demand in 2009, and all indications were that the downturn could last until at least the middle of 2010.
“Most predictions are off a bit, but for now, I’d say that a sustained recovery in SBR won’t happen before the third quarter of next year at the earliest,” an analyst for an SBR producer said.
An SBR producer largely agreed, adding that all signs indicated “that 2010 will be as challenging as 2009”.
SBR demand is largely driven by tyre sales, which in turn are driven by the replacement tyre sector, and by the original equipment manufacturer (OEM) sector that produces tyres for new vehicles.
Both sectors were moribund for most of the year, and from the same cause – the global economic resession.
Because of widespread job layoffs, worries about the rising unemployment rate and credit issues, auto and truck sales plummeted. That effectively killed OEM tyre demand - and a big chuck of SBR demand with it.
The decline in vehicle sales prompted the federal government to initiate a plan, known casually as “cash for clunkers,” to jump-start the auto industry.
Cash for clunkers offered rebates of up to $4,500 (€3,150) toward the purchase of new, fuel-efficient vehicles to consumers who were willing to trade in their older, gas-guzzling vehicles.
The initial $1bn programme was successful enough that it was extended to the tune of an additonal $2bn. However, sales figures again waned when the programme ended, and there were no signs that the government would again implement the programme in 2010.
While the OEM sector struggled throughout the year, the replacement tyre sector eventually began to recover. However, yearly sales in the fourth quarter still lagged well behind year-earlier numbers.
An improvement of up to 3% in the replacement tyre market - about one-half of what was lost in 2009 - could occur in 2010, according to the Rubber Manufacturers Association (RMA).
That forecast still leaves replacement tyre sales down from normal levels in 2010, and it could take many more months before OEM tyre sales even approach normal levels.
Unfortunately for SBR sellers, some tyre producers said that keeping inventories at a manageable level will be a priority in 2010.
Goodyear Tire & Rubber said it was not planning to return to the levels the company had in 2008. Similarly, Michelin said it would work to cut inventory levels, among other things, in an effort to generate a free flow of cash.
Until then, SBR sellers say, they will have few alternatives but to run at lower-than-normal rates to keep supply from running too far ahead of demand.
The SBR market in 2010 will be a waiting game for sellers who will closely watch for a sustained recovery in auto sales, the analyst said.
“Along with the problem of unemployment, there’s the issue of credit. Even with a job, you need good credit to buy a car, and lots of people don’t have good credit right now,” he said.
($1 = €0.70)
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