OUTLOOK ’19: US SBR market to remain competitive with imports

HOUSTON (ICIS)–Persistent pressure from imports is expected to continue on the US styrene butadiene rubber (SBR) market in 2019.

Countries without antidumping duties imposed made a push into the US in late 2018 amid rising domestic SBR prices throughout much of the year.

A disconnect between SBR contract and spot prices occurred as contracts continued to rise, tracking higher costs for feedstock butadiene (BD), and remained elevated into October alongside a tight BD market.

SBR contract pricing in the US is largely based on costs for BD and styrene, with BD the larger factor in the cost push.

Meanwhile, SBR spot prices began to fall in mid-2018 as imports became readily available and demand slowed for domestic material.

Low demand in China and an open arbitrage from Asia made low-priced imports available to buyers.

SBR demand in China fell on low costs for rival material natural rubber, a fall-off in vehicle sales and lower tyre production stemming from the US-China trade dispute.

Additionally, other countries looked to gain market share in the US.

The widening spread between spot and contract prices through much of the second half of the year weighed on discussions for 2019 contracts, with buyers saying that fees came down versus a fee increase in 2018.

In addition to fee decreases, cost declines for feedstock BD are expected in the near term, having begun in late 2018.

US BD production is expected to grow in 2019 as new ethylene capacity increases availability of feedstock crude C4 (CC4).

A low crude-price environment should also keep heavier feedstock cracking economic, buoying supply of CC4 and BD.

Lengthening BD supply should keep SBR producers’ costs lower, creating opportunities for growth in downstream sectors.

Domestic demand is likely to rebound in early 2019 as inventories are rebuilt, bolstered by cost declines.

Still, imports will remain competitive. SBR demand in China may remain low due to natural rubber availability and the possibility of an increase in US tariffs on the material. Although a 90-day truce was recently announced, the US-China trade dispute remains unresolved.

Continued low SBR demand in China will leave material available, some of which could make its way to the US and keep some pressure on SBR spot prices.

Focus article by Amanda Hay and Jessie Waldheim

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