SR price pressures ‘set to ease’ after Q2

Hanover, Germany –  Current upward pressures on synthetic rubber (SR) prices should ease off after the second quarter of the year as feedstock availability returns to normal, believes Daniela Quintero, commercial intelligence manager at Grupo Dynasol.

According to Quintero, SR prices are being driven largely by developments in the butadiene market, where availability has been a key issue over recent months. This, she said, is particularly the case in Asia and Europe, due to shutdowns of large crackers for maintenance.

Another factor has been an unexpected pick-up in Chinese demand over the last few months of 2016 and continuing into January, the Houston, Texas-based manager pointed out.

“But Chinese automotive market demand is not expected to be so big this year, compared to last year,” said Quintero, citing the ending of a tax-break on car purchases in China, last December.

Last year, she said, also saw strong export demand from Chinese tire makers as they diverted product from their tariff-hit US markets to other regions, particularly India.

“Moving into a new market requires a lot of inventory-building,” explained Quintero. “But that will not be sustained this year.”

Demand is also expected to fall off mid-year, based on GDP forecasts for Asia and a seasonal slowdown in European markets over the summer, Quintero added.

Quintero described the current SR price situation as “fairly unique”noting that there were similar increases back in 2011/12 – driven, though, by downstream demand rather than, as now, feedstock-availability.