18 July 2013 15:24 [Source: ICIS news]
LONDON (ICIS)--Sluggish tyre demand in Europe as a result of ongoing economic weakness in the region is exerting pressure on manufacturers of styrene butadiene rubber (SBR), feedstock butadiene, and other key tyre-making chemicals, ratings agency Moody’s said on Thursday.
The report follows an announcement by trade body the European Tyre and Rubber Manufacturers’ Association (ETRMA) earlier this week of a 6% year on year contraction in European replacement tyres, a market that Moody’s estimates accounts for 70-80% of all tyre sales in Europe.
Spot prices of SBR and BD have fallen sharply in Europe and Asia since the start of 2013, according to ICIS data, which Moody’s attributed to the oversupply of SBR as a result of new installed capacity.
The new capacity additions were driven by strong prices and volumes from 2009 through 2012, as well as anticipated future demand from emerging markets, and this has exacerbated lower pricing trends this year, according to Moody’s.
“Many market participants expected tyre demand to recover in the second half of 2013, but we believe demand will remain depressed, if up versus the first half of the year which will offer little immediate support to SBR volumes,” the agency said.
Additional BD capacity in Asia is likely to squeeze prices further, making the possibility of relief for SBR producers less likely.
“SBR producers may also face more pricing pressure in the second half of the year because feedstock prices have also continued to decline as a result of weak demand and oversupply of butadiene due to the recent addition of extra new capacity by Asian producers,” Moody’s added.
The agency identified Russia-based company Nizhnekamskneftekhim (NKNKh), US company Trinseo – formerly known as Styron - and Germany-headquartered group LANXESS as the most exposed to the SBR market’s woes, due to their respective levels of exposure to the sectors.
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