AFPM ’19: US SBR supply to remain ample, demand sluggish

HOUSTON (ICIS)–Healthy supply and relatively sluggish demand are expected to continue in US styrene butadiene rubber (SBR) markets heading into this year’s International Petrochemical Conference (IPC).

With supply outpacing demand, any price pressure on SBR will stem from changes in costs for primary feedstock butadiene (BD) and secondary feedstock styrene.

“There is plenty of material all over the place, and prices and contracts are under pressure,” a source said. “The outlook for 2019 does not seem quite optimistic.”

SBR demand softened globally toward the latter half of 2018, and weakness continued into 2019.

Asia has been the primary driver of this bearish sentiment as trade tensions, a sluggish automotive sector and overall economic uncertainty have dampened buying appetite.

After entering its first slump in more than two decades in late 2018, China’s auto market continues to be soft in 2019.

Downstream tyre factories in Asia have largely reduced operating rates on declining vehicle sales, which weigh on spot SBR demand.

Most buyers in Asia are covered until April, so demand is not expected to pick up seasonally until then.

Still, economic uncertainty will persist and significant demand growth is not expected.

US tyre companies anticipate flat-to-slight growth in light vehicles this year, with greater growth in truck tyres.

Changes in feedstock costs appear to be the only variable in the near-term, with SBR supply and demand dynamics anticipated steady.

US production of BD, the primary price driver for SBR, is expected to remain healthy after a period of tightness in 2018.

Amid lower crude prices compared with last year and oversupply of ethylene, cracking of heavier NGL feedstocks, which yield more BD feedstock crude C4 (CC4), remains supported.

Several new crackers are starting production this year, and the US has BD capacity to process additional CC4 as it becomes available.

The US has a light cracker maintenance schedule this year, but Europe and Asia maintenance will be heavier than usual.

This could tighten US BD if there is a demand uptick for exports, but thus far buyers in other regions appear to be covered ahead of planned maintenance.

Additionally, a price downtrend for Asia BD could weigh on US BD prices.

SBR prices are steady to lower this year, largely tracking feedstock BD.

March SBR contract prices were assessed at 74-83 cents/lb ($1,631-1,830/tonne) FOB (free on board) for non-oil grade 1502 SBR, down 1 cent/lb from February on pressure from styrene’s decline as BD was flat.

Spot prices are flat on limited activity.

SBR is a key feedstock in the production of tyres for the automotive industry.

Major North American SBR producers include Dynasol, Goodyear Tire & Rubber and Lion Elastomers.

Hosted by the American Fuel & Petrochemical Manufacturers (AFPM), the IPC takes place on 24-26 March in San Antonio, Texas.

Focus article by Amanda Hay
Additional reporting by Helen Yan