INSIGHT: Limited butadiene supplies to hit US SBR market

13 February 2012 22:22  [Source: ICIS news]

By Wesley Busch

HOUSTON (ICIS)--Limited supply and high demand for feedstock butadiene (BD) are causing anxiety for US styrene butadiene rubber (SBR) producers and buyers amid rising US tyre production.

US auto manufacturers expect the number of vehicles sold this year to grow by 5-7%.

On these autos will be new tyres. However, most of the new tyres are destined as replacements rather than those that go on new autos. The bottom line, however, is growth in tyre production.

This growth will be met with increased feedstock costs and the overall cost of SBR.

BD prices have climbed by 22% since the December contract price was settled. A split settlement for February left US butadiene (BD) contracts at prices of $1.18/lb ($2,601/tonne, €1,977/tonne) and $1.30/lb.

SBR prices, on average, have also increased 22% during that time. Prices for February rose to 136–146 cents/lb were for non-oil grade, and 113–125 cents/lb for oil-enhanced grade 1712.

Three US crackers have already shut for scheduled maintenance turnarounds since the start of the year, and another five US producers plan to perform maintenance during the next few months.

This, inevitably, will make an already tight market even tighter, market sources say.

The US market saw the higher prices coming as the price of Asia BD began to rise before 2011 came to a close.

Asia prices jumped 30% in December.

US December contract prices decreased for the fourth consecutive month before moving up in January.

Asia BD spot prices were assessed last week at 181 cents/lb as Asia BD producers are also undergoing maintenance turnarounds.

Market sources believe Asia will pave the way for more increases in BD costs in the US, with some expecting contracts in March to jump 20-25 cents/lb, which is about 19% more than the February contract prices.

The increases in BD prices pull up the price of SBR, which could rise to 154 cents/lb on average.

SBR is but one material that uses BD, and other markets are demanding the feedstock.

BD is used to produce synthetic rubbers, polymer resins and a few chemical intermediates. SBR for tyres consumes the most BD.

BD is also used in polybutadiene rubber, which is also used primarily in tyres, as well as an impact modifier for polymers such as high impact polystyrene (HIPS).

Acrylonitrile butadiene styrene (ABS), the largest of engineering thermoplastic resins by volume, also uses BD.

As if the number of crackers undergoing and planned to undergo maintenance turnarounds was not straining the supply enough, one BD producer, on allocation at 90% in February, looks to increase its restriction to 45% in March because of planned maintenance at another cracker later this month.

Market sources believe spot purchases of BD for March delivery will fetch 160 cents/lb or more and April spot prices would be 10 cents/lb higher, putting the price just 5 cents/lb lower than the hit that contracts hit in 2011.

While some expect to see BD to make a correction, others see the upward trend continuing.

On top of rising BD prices, there is styrene, which is the main component of SBR.

January US contract prices for styrene rose by 11% from December on the back of a 40% jump in feedstock benzene.

This latest surge in benzene costs will be felt in the February styrene contract, which has already received early nominations of an increase of 7 cents/lb.

US market participants should stay tuned and keep their seat belts fastened.

SBR and feedstock price chart

($1 = €0.76)

By: Wesley Busch
+1 713 525 2653

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