11 June 2013 15:48 [Source: ICIS news]
By Mark Yost
DETROIT (ICIS)--This much is clear: ?xml:namespace>
Goodyear reported that it sold 1m fewer tyres in
What is to blame? That is where it gets complicated.
For much of 2013, the blame has been put squarely on the shoulders of the petrochemical industry.
"Butadiene is too high" has been a common refrain, which is usually followed by "that makes SBR too high".
But there is a new theory emerging that is starting to gain traction in petrochemical circles: The problem is not the price of petrochemicals -- it is the price of tyres.
It is not a self-serving argument.
The contract price for US BD among the three producers that account for about 85% of the market has come down from 84 cents/lb ($1,852/tonne, €1,389/tonne) in March and April to 79 cents/lb in May. Last week, the June US BD price settled at 74 cents/lb among the three big producers. The fourth producer, which accounts for about 15% of the market, settled at 81 cents/lb, sources said, bringing the weighted average for June down to 75.26 cents/lb.
US BD has come down nearly 12% over the past three months alone. A year ago the contract price was $1.07/lb. The monthly contract price has not been as low as it is today since March 2010 when it was 70 cents/lb.
Of course, BD has not always been this low. Over the past five years, the average contract price has ranged from 25 cents/lb in April 2009 to $1.75/lb in August 2011.
The contract price for SBR has come down as well. Over the past year, the average contract price for SBR 1502 has fallen by nearly 14% from 134 cents/lb to 115.5 cents/lb. The June SBR 1502 contract price is also down nearly 30% from a five-year high of 164.5 cents/lb in April 2012.
Despite SBR and BD being down from historic highs, tyres are still expensive in the
"It's a conscious choice they made," said one market source. "And it makes sense given that the European and US markets are either mandating or about to mandate the low rolling resistance tyres that are made from SSBR. But given that, they can't put the whole blame on us (petrochemicals) for slack sales."
That is a valid point, market sources said. But there is only one problem with that theory:
"Usually, the discounts stop before Memorial Day," one source said. "But I'm seeing them well into June. That tells me just how much trouble the tyre market is in."
BD and SBR prices are expected to fall further in the coming months, market sources said. That is because about 75% of BD goes into making SBR, 80% of which goes to make replacement tyres, a market that is clearly in a global slump. The other 25% of BD produced mostly goes into making acrylonitrile-butadiene-styrene (ABS), which goes toward plastics for the automotive industry, as well as consumer electronics and appliances that are driven by the housing market.
Outside of these market fundamentals, US BD sources said that they are also concerned about European crackers that are completing scheduled maintenance and are slated to come back online over the next month or so. With the European economy doing worse than the
"I think we worked our way through a lot of the excess BD leading up to the turnarounds," the source said. "It was offloaded to Asia before the turnarounds, and the European crackers will start back up at reduced rates, negating the need to arbitrage product to the
That would be good news for US BD producers already under siege from less-expensive Asian-made BD and SBR. Indeed, instead of shipping cheaper BD to the US, which would cost about $400/tonne, Asian producers are converting less-expensive Asian BD to make SBR and then shipping it to the US, which only costs about $150/tonne.
US SBR producers have been among those pressuring domestic BD producers to cut prices to make US SBR -- as well as BD --more competitive with Asian product.
But what has both SBR and BD
($1 = €0.75)
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