Commentary: LANXESS closures signal rubber trouble

15 March 2013 09:14  [Source: ICB]

The surprise announcement by Germany's LANXESS that it is temporarily closing a butyl rubber plant in Belgium and an ethylene-propylene-diene monomer (EPDM) facility in Texas, US, is a visible sign of poor market conditions in this sector.

There has been a flood of worrying news emerging from tyre producers and upstream feedstock manufacturers in recent weeks, all linked to poor demand.

Japanese tyre maker Bridgestone announced that it would close a European plant at Bari, Italy, while earlier in the year Goodyear revealed plans to shut a site in Belgium.

Meanwhile, styrene butadiene rubber (SBR) prices in Asia have been plummeting as feedstock butadiene prices fall amid abundant supply and weak demand. Chinese SBR producers complain of extremely poor demand conditions, with high inventories along the supply chain, including traders, producers and tyre makers.

According to LANXESS: "Soft underlying demand in the second half of 2012 has continued into 2013 across most businesses, against the usual seasonal trend." This is worrying for a company that does most of its business in terms of earnings before interest, tax, depreciation and amortisation (EBITDA) in the first half of the year, according to analysts.

By: Will Beacham
+44 20 8652 3214

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