Chemical Profile - POLYBUTADIENE RUBBER

26 April 2004 00:01  [Source: ICB Americas]

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POLYBUTADIENE RUBBER

April 26, 2004

US PRODUCER	CAPACITY*
American Synthetic Rubber, Louisville, Ky.	160,000
Bayer, Orange, Tex.	250,000
Bridgestone/Firestone Americas Holding, Orange, Tex.	150,000
Goodyear Tire and Rubber, Beaumont, Tex.	250,000
Total	810,000

*Metric tons per year polybutadiene rubber (BR), net rubber basis (includes elastomer hydrocarbon and extender oils, but not carbon black). Commercial production is by solution polymerization of butadiene monomer. The capacities of American Synthetic Rubber, Bridgestone/Firestone and Goodyear are multipurpose and can produce solution BR or solution styrene-butadiene rubber (SBR). Bayer’s capacity at Orange, Tex., includes 25,000 metric tons of vinyl BR, used for tire treads. Bridgestone/Firestone produces small quantities of high-vinyl polybutadiene at Lake Charles, La. In 2003, Bridgestone/Firestone added 20,000 metric tons of capacity to its Orange, Tex., facility. The project had originally been slated for completion in 2001, but was delayed because of the soft market conditions at the time. In late 2002, Bayer closed its 36-year-old polybutadiene plant in Sarnia, Ontario, Canada, which had 90,000 metric tons of capacity, because of unfavorable market conditions. The company moved the Canadian production to its plant in Orange, Tex., which was expanded by 75,000 metric tons in 1999. In 2001, Bayer again increased its capacity at OrangeÑby 40 percent to 250,000 metric tons. Profile last published 4/3/00; this revision, 4/26/04

DEMAND

2002: 520,000 metric tons; 2003: 531,000 metric tons; 2007: 570,000 metric tons, projected. Demand equals production plus imports (2002: 102,000 metric tons; 2003: 74,000 metric tons) less exports (2002: 226,000 metric tons; 2003: 237,000 metric tons).

GROWTH

Historical (1998-2003): 0.2 percent per year; Future: 1.8 percent per year through 2007.

PRICE

Historical (1998-2003): High, 82 cents per pound (list), clear rubber grade, t.l. or c.l., f.o.b. works; low, 82 cents, same bases. Current: 82 cents per pound (list), clear rubber grade; plastic grade, 2 cents per pound higher, same basis. Significant discounting of 20 to 30 percent exists in the market.

USES

Tires and treads for automobiles, trucks and buses, 77 percent (passenger cars, 30 percent; trucks and buses, 39 percent, tread rubber, 8 percent); high-impact resin modification, 19 percent (mainly for polystyrene and acrylonitrile-butadiene-styrene (ABS)); industrial products (conveyor belts, hoses, seals and gaskets) and other applications, 4 percent.

STRENGTH

Tire products have been the mainstay of BR since its introduction in 1960. But in recent years, impact modification of plastics, particularly polystyrene and ABS, have become an important outlet for BR. In 2003, the plastics industry accounted for 19 percent of total BR consumption versus only 15 percent in 1985. Growth forecasts indicate that impact modification will increase to about 21 percent of total BR consumption by 2007.

WEAKNESS

Slow growth combined with capacity buildup during the 1990s to create an oversupply in BR, and producers have had to cut back production to adjust. In particular, the North American tire industry is in a state of decline. Not only have unit sales been lower in the past couple of years, but tire makers improved their warranties from 20,000 to 80,000 miles over time, yet did not cut capacity to compensate.  Another issue for BR is competition with natural rubber, which can be substituted for polybutadiene in tire applications by 3 to 5 percent and up to 20 percent in other applications. When natural rubber prices were low six years ago, tire producers added more natural rubber to their formulations. As natural rubber prices have begun to recover, however, the tire makers continue formulating with natural rubber. On the supply side, the industry’s single biggest raw material, butadiene, has been in short supply. Naphtha-based ethylene crackers that have throttled back because of high naphtha prices and low demand for ethylene derivatives, are producing little co-product butadiene.

OUTLOOK

Technology is driving the tire polymers market. Innovations in the tire industry—including better traction, lower rolling resistance, longer wear and run-flat capability—are pressuring elastomer suppliers to improve their products—in which substitution of other synthetic elastomers and natural rubber partially displace BR. Though the list price for BR has been steady for more than five years, market prices have and will continue to show volatility because of BR’s sensitivity to butadiene availability. Over the forecasted period, growth is projected at 1.8 percent annually. Capacity will remain more than adequate to meet North American needs, even with the recovering economy.

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