Chemical profile: US SBR

06 December 2013 09:44 Source:ICIS Chemical Business

Styrene butadiene rubber (SBR) is used mainly to make tyres – either for the replacement tyre market, which drives about 75% of SBR demand, or for the original equipment (OE) tyre market. Other non-tyre uses include applications in conveyor belts, gaskets, hoses, floor tiles, footwear and adhesives.

There are two major types of SBR, with a shifting trend from emulsion (E-SBR) in conventional tyres to solution (S-SBR) in high-performance tyres. S-SBR uses more feedstock butadiene (BD) and is considered to improve performance, safety and fuel efficiency.

Demand for SBR is highly dependent on the automotive sector, and demand for tyres has been described as very soft, except in the premium segment.

Many tyre makers in the US and the EU have chosen to focus on higher-end products made from S-SBR while ceding the low-end market that relies on E-SBR to cheaper Asian imports.

Additionally, vehicle owners are not replacing their tyres as often. Research firm LMC International reported that for decades, the replacement ratio for tyres was steady at 1.0, meaning drivers replace one tyre per year or all four every four years.

The replacement ratio fell to about 0.90 in 2009 in the wake of the recession, and even though there was a slight uptick in 2010-2011, the replacement ratio has fallen again to about 0.92 today.

The lack of global demand for replacement tyres rippled back through the supply chain, driving down the price of both SBR and BD. Also, there was a growing surplus of natural rubber (NR), particularly in Asia, which influences the price and use of SBR.

However, the OE tyre market continues to do well, although new car sales only account for about 20% of the tyre sales.

For October, US-based firm AutoData reported that US auto sales increased by 11% year on year, and the year-to-date figure was 8.4% than 2012.

While several factors – including styrene and natural rubber prices – can affect prices of SBR, the biggest impact by far is from BD.

US SBR contract prices were flat through Q4 2012 and Q1 2013, with SBR 1502 grade trading at 112-122 cents/lb and SBR 1712 grade trading at 95-105 cents/lb.

Prices rose for the March contract on rising BD and again for the May contract, establishing a top at 114.5-124.5 cents/lb for 1502 and 97.5-107.5 cents/lb for 1712.

However, both grades fell by 10 cents/lb for July in line with falling feedstock costs and global demand for replacement tyres. Prices continued at a gradual decline until bottoming out for August at 80.5-90.5 cents/lb for 1502 and 63.5-73.5 cents/lb for 1712.

The spread widened for September when 1502 remained flat while 1712 rose by 11 cents/lb. Prices were steady for both grades for October, although there was upward pressure in November because of rising BD.

Spot prices followed the same trend and are still about 40 cents/lb lower than they were at the start of the year.

SBR is produced by the copolymerisation of BD with styrene in the approximate proportion of 3:1 by weight. The emulsion process, which produces general-purpose grades, uses feedstocks suspended in a large proportion of water in the presence of an initiator, or a catalyst, and a stabiliser. This employs continuous process production.

In the solution process, the copolymerisation proceeds in a hydrocarbon solution in the presence of an organometallic complex. This can be either a continuous or batch process. Some plants have swing capacity with polybutadiene rubber (PBR).

Demand for SBR has been relatively stable to lacklustre, which has resulted in production cutbacks, as sellers tightened supply to just meet contract obligations. SBR and tyre producers said they planned to keep plants operating at significantly reduced capacities through the end of the year.

Meanwhile, the trend from conventional E-SBR toward high-performance S-SBR will continue in the US and Europe, and the market share of replacement tyres is expected to remain in favour of Asian producers, which has shifted over the past few years because of relaxed tariffs.

The US replacement tyre industry was expected to turn around in 2013, but growth has been slow. Many market players are now anticipating that 2014 will be a carbon copy of 2013, with little-to-no growth, as they do not see the market being robust right now and tend to think that it will remain that way.

By Tracy Dang