Likely butadiene shortage to push up 2014 SBR prices: bank

17 October 2013 16:45  [Source: ICIS news]

LONDON (ICIS)--Synthetic rubber producers should be betting on a butadiene (BD) shortage next year that will push up their prices, a bank said on Thursday.

“Despite butadiene market weakness this year that reached its bottom at the beginning of Q3 [third-quarter] 2013, we are increasingly optimistic regarding butadiene prices in 2014, which should again translate into higher synthetic rubber prices in Asia and consequently in Europe,” said Dominik Niszcz, an analyst at Austria-based Raiffeisen Centrobank (RCB).

“The butadiene price has almost doubled since the beginning of July when it was totally unprofitable to produce the feedstock, while structural changes in global markets that resulted in butadiene shortages in 2011-2012 remain in place,” he added.

Upgrading RCB's rating on Poland's major synthetic rubber producer Synthos to 'Buy' from 'Hold', Niszcz said that the global macroeconomic weakness that has had a negative impact on the replacement tyre market should ease off, allowing sales to recover by next year.

“Additionally, sales of new cars in emerging markets are constantly increasing the global base for replacement tyres and may accelerate next year increasing demand also for original equipment tyres,” he added.

Another factor that might make BD supply insufficient was the fact that the falling share of naphtha feedstock  in crackers – especially in the US where ethane sourced from shale gas is increasingly used – may not yet be offset by new on-purpose BD installations, in which gas  feedstock id dehydrated into the final product), noted Niszcz. 

“Stronger investments in on-purpose installations may be launched only provided that it becomes  profitable, which is still not necessarily the case at current butadiene price levels,” he said.

By: Will Conroy
+44 20 8652 3214

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