SBR, butadiene markets expected to remain flat

Report originally published in ERJ's January/February issue

London - European synthetic rubber and butadiene markets are expected to be flat in the first half of the year with buyers in a “wait and see” mode, according to a leading market trader.

The global supply and price volatility in Asia has led to buyers becoming more cautious at this point in time, the trader, who declined to be identified, told ERJ.

“SBR and butadiene buyers learned a lesson from last year’s panic in the market, when prices nose-dived after a surge earlier in the year,” he explained to ERJ.

For instance, figures from Kumho Petrochemical show that butadiene prices in Asia shot up roughly 300% year-on-year in January last year to just under $3,000/tonne.

Europe, meanwhile, experienced a rise to over €1,500/tonne in February, up from €950/tonne a month earlier.

Butadiene market pressures eased suddenly at the end of June, when prices went back to $947/tonne in Asia and roughly €700/tonne in Europe.

The decline, subsequently, reversed to a slow pace of growth with average butadiene prices reaching €900/tonne in Europe at the end of October last year, according to IHS figures.

At the time, force majeure measures and turnaround season were cited as the reasons for tight supply of butadiene in Asia, leading to a spike in SBR prices too.

SBR prices rose to just under $2,400/tonne in January 2017, according to Kumho figures. In September, with BD price easing, the figure was down at $1,678/tonne.

“There was no clear reason for the increase, it was just a speculation,” explained the trader to ERJ.

Producers and traders in Asia saw a healthy demand and limited supply and that created a panic and overreaction of customers, he went on to say.

“It was just like bitcoin,” he added.

The market trader estimated that demand for rubber goods, especially tires, would grow “just steadily”, leaving no real impact on prices.

As for supply, he said US butadiene market in 2018 is expected to increase due to the start-up of number of new crackers.

In Asia, however, due to the environmental issues, the supply might be “erratic” in short term, he pointed out.

“I think the market will be steady in the first half of 2018, the demand and prices of SBR and butadiene will be rather flat,” the trader concluded.