Styron predicts 10% growth for S-SBR

By David Shaw, ERJ staff report

London -- Styron expects demand for solution-SBR to grow at 10 percent in the coming years, based on demand from tyre makers. Marco Levi, head of Styron's elastomer business, discussing the company's investment in a new 50 kt/year line in Schkopau, Germany, said historical growth in this material has been roughly 3 percent, but demand is now starting to accelerate as tyre makers respond to consumer demand triggered by the advent of tyre labels. Growth, he said, is driven by performance and legislation.

He said the new line, due on stream at the end of 2012, represents an investment of $125 million and will bring capacity at Schkopau to 150 kt/year. Levi said it is the first major capacity investment announced by Styron since it acquired the styrene-based assets of Dow Chemical six months ago. As such, it indicates the importance that the new owners, Bain Capital, place on the S-SBR business. Levi said the announcement is cautious in capacity terms, and the aim is to maintain Styron's market share in the business. He hoped to make another capacity-related announcement by the end of 2011.

According to Levi, global demand for S-SBR today is around 500 kt per year, almost all of which is consumed by the tyre industry. He said capacity is short at present and demand currently out strips supply.

Styron's growth projection is based on known figures up to 2015 or so, but does not take account of potential tyre-related legislation in China. If the Chinese adopt low-rolling resistance tyres, noted Levi, then demand projections will increase substantially. Levi said demand is likely to exceed 1000 million tonnes annually by 2020.

Currently Styron ships 30 percent of the output from Schkopau to Asia-Pacific region. He said it is difficult to see when and how legislation and performance requirements will change in China. He said Styron expects big demand growth for these materials in China, but was unable to suggest a timescale.

The biggest market is Europe and Levi said it was lower business risk to build a new train in Germany, rather than going directly into Asia. However, he noted that Stryon is watching the Asian scene very closely and said it is eager to have capacity there at some point. He said this might be through a direct investment, or through an acquisition, or even an alliance or joint venture. In the short term, however, Levi was clear that the Schkopau site offers a much lower business risk than other options, given the current investment and the relations it has with raw materials suppliers.

Levi noted that the market for S-SBR tyre materials is maturing and segmenting, as tyre makers develop different compounds for winter tyres, ultra-high performance tyres and comfort-based tyres. The material makers are responding with a variety of solutions to help support this diversification. He said Styron aims to be best in class in terms of technology.

He said Styron is counting on its technology pipeline for continued success in S-SBR. The company launched 2 years ago the second generation S-SBR and is now preparing generation 3, which, he said, "will show another quantum step in rolling resistance and processability in compounding."

The new line will have the capability to make these new materials. In particular, said Levi, tyre makers are aware that they can deliver competitive advantage through rubber polymer chemistry. This, he said, will lead to much tighter cooperation between tyre makers and their polymer suppliers in general and Styron in particular. He said this will lead to much more focussed product development programmes.

As the market matures, he said, tyre makers will need a variety of solutions for different tyre markets. He emphasised that while there is growth in the S-SBR business and that growth is increasing, it is not merely about volume growth, it is that Styron has a leadership role to play from the technology point of view.

This is an external link and should open in a new window. If the window does not appear, please check your pop-up blocking software. ERJ is not responsible for the content of external sites.

Original press release from Styron (The above story is based on an exclusive interview with Marco Levi)