OUTLOOK '12: Feedstock, supply among challenges for US SBR in 2012

29 December 2011 17:52  [Source: ICIS news]

HOUSTON (ICIS)--The US styrene butadiene rubber (SBR) market will face several challenges in 2012, including volatile feedstock costs, a tightening of supply and weak global economies.

The year will begin with feedstock costs at near year-low marks and SBR contract prices at their lowest of 2011 - averages of 115 cents/lb ($2,535/tonne, €1,952/tonne) for non-oil grade 1502 and 97 cents/lb for oil-enriched grade 1712.

Market sources believe there could be a further decline in feedstock butadiene (BD) costs in January, which could even further erode the contract prices established for December.

The outlook is mixed after that as some participants expect prices to begin an upward climb in February, while others believe the movement will not begin until later.

In either case, it won’t be long until prices start to reflect the tightening of BD supply, as anywhere from seven to nine crackers begin scheduled maintenance turnarounds that are expected to take place between January and the end of June.

Sales of new automobiles are expected to increase by about 5% from 2011 numbers. While that is a positive sign for SBR producers because of the consequent need for tyres, it is the replacement market that accounts for most of the tyres manufactured annually, at about 75% of the total.

The US economy will have its own impact on the market, as the unemployment rate has been around 9% for many months The rate for November was 8.6%, according to the US Bureau of Labor Statistics.

Several SBR market sources said they believe US economy will not see much improvement in 2012, considering the high unemployment rate and political gridlock in the US Congress.

The debt crisis in the eurozone also continues to dampen the economic spirit, not only in Europe but throughout the world. The economy in Asia is the lone positive aspect among the global economies.

The economic rate of growth in Asia, and specifically China, is expected to be strong, at 5-10%, and, because of the growth, there are opportunities for producers to satisfy the demand that is sure to surface in Asia, sources said.

Asia is the only region where the SBR market is moving forward at any measurable rate. BD prices have been on the rise, and SBR demand has been growing.

($1= €0.77)

For more on SBR visit ICIS chemical intelligence

By: Wesley Busch
+1 713 525 2653

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