Corrected: Synthetic rubber industry faces difficult few months – SBR producer

17 April 2012 10:21  [Source: ICIS news]

Correction: In the ICIS story headlined "Uncertainty is here to stay - SBR producer" dated 17 April 2012, please read the headline as "Synthetic rubber industry faces difficult few months - SBR producer" instead of "Uncertainty is here to stay - SBR producer". In the second paragraph please read ...two to three months... instead of ...two to three years...and please note amended first paragraph to reflect this change. A corrected story follows.     

VENICE (ICIS)--After the boom years that ended with the 2008 financial crisis and subsequent recovery, the synthetic rubber industry faces more uncertain times, a source from Synthos said on Tuesday.

“The next two to three months will be difficult because tyre demand is down which means less SBR is sold,” the source from the Poland-based producer said on the sidelines of the annual meeting of the International Institute of Synthetic Rubber Producers (IISRP).

Replacement small vehicle tyre sales have fallen by up to 15% in Europe compared with last year, and truck tyre sales are down by as much as 20%.

The tyre industry accounts for more than two-thirds of SBR consumption globally.

If tyre sales fall, demand for SBR drops. With fuel costs at an all-time high, people drive less and buy fewer cars and tyres, which affects SBR sales.

“There is a huge potential in the BRIC [Brazil, Russia, India, China] countries, where tyre consumption is forecast to rise, so a lot of attention is paid to those countries now,” the source added.

Another major problem, besides lower SBR consumption, is the high price of raw materials.

The price of butadiene (BD), which makes up about 70% of the cost of SBR, has risen in Europe by €625/tonne ($822/tonne) since December last year, from €1,650/tonne FD NWE to €2,275/tonne FD NWE, putting extra pressure on SBR makers.

Because downstream demand is low and BD costs are high, SBR producers are being squeezed in the middle, and this is not about to change soon, the source added.

However, there are promising signs in new projects and plant expansions in the pipeline in Europe and Asia.

Hungary-based petrochemical producer MOL is expected to open a new 130,000 tonne/year BD plant in 2014 costing €100m. MOL would not say whether the plant would be built in Hungary or Slovakia.

“With additional [raw material] capacity coming on line in Asia and in Europe the situation can change to the better, but it is all a question of time,” said the source.

For now, the only certainty is uncertainty for many, for some time to come.

($1 = €0.76)

By: Janos Gal
+44 208 652 3214

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