08 February 2013 10:09 [Source: ICB]
The US February butadiene (BD) contract price rolled over from January, sources confirmed, because of a weak downstream styrene butadiene rubber (SBR) market.
Most US BD producers have a February contract price of 76 cents/lb ($1,675/tonne, €1,240/tonne), while a fourth producer, which accounts for about 18% of the US production capacity, has a contract price of 83 cents/lb.
US BD contracts normally settle at the end of the month for the following month. This is the third consecutive month that BD has seen contract prices at this level.
WEAK TYRE MARKET
SBR is used primarily to produce tyres and the US tyre market has been weak, with many tyre producers holding large inventories of finished goods and raw materials. The SBR market has seen lacklustre demand for many months. About 75% of the SBR production is tied to the manufacture of tyres for passenger cars and light trucks.
BD demand has been growing weaker since May, as has the main downstream consumer SBR market. The SBR industry consumes about 75% of the BD produced in the US, according to market sources.
While the sale of new passenger cars and light trucks in the US saw an increase of 14% in 2012 over 2011, it is the replacement tyre sector, and not the original equipment tyre sector, that represents 75-80% of the market for these types of tyres.
Until the US public begins buying replacement tyres at significant numbers, demand for SBR and therefore BD will remain weak.
An indication that the US driving public is delaying the purchase of replacement tyres for their vehicles is the growth in the ratio of US vehicles with bald tyres.
In November 2012, the Rubber Manufacturers Association (RMA) announced that a survey showed that more than one in eight vehicles had at least one bald tyre on the ground.
A similar survey conducted in 2010 showed the rate to be slightly more than one in 10 vehicles with a bald tyre on the road.
BD producers in North America include ExxonMobil, LyondellBasell, Shell and TPC Group. Buyers include Ashland, INVISTA, LANXESS, Michelin and Negromex.
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