Tariffs 'could hit profitability' of US petchems, rubber producers'

Dublin – Global trade wars triggered by US import tariffs threaten the high levels of profitability currently seen in the US petrochemicals industry, believes Bill Hyde, VP olefins & elastomers, Chemical Market Analytics (CMA).

Addressing the recent AGM of the International Institute of Synthetic Rubber Producers in Dublin, Hyde said: “President Trump talks of a new ‘golden era’ for US industry manufacturing: well, in some of our industries, we're already there."

“The US petrochemicals industry, especially if you're in plastics and polymers, is absolutely in a golden age right now. But we're at great risk of doing significant damage to that,” he added.

For instance, he said, US polyethylene producers are exporting about 50% of their production, but “if there's not going to be a home for that polyethylene, they will have to cut rates.”

That scenario, warned Hyde, presents a “real risk” to synthetic rubber producers, because so much of the butadiene and other feedstock products are a co-product from ethylene crackers.

With potential now for an estimated 15% rate-cut on ethylene crackers, the US could move from "sort of balanced along on butadiene, back to being a significant net importer," the CMA expert suggested.

Making up the gap, he said, “will likely be northeast Asia, especially mainland China, where there are five new ethylene crackers starting up this year."

With this likely to put downward pressure on Asian feedstock costs, some synthetic rubber producers "might win" if US polyethylene exports are curtailed, according to Hyde.

But, he forecast, there will be a negative impact on US producers, especially if "Asian rubber production comes back to the Americas and hits domestic demand that much harder.”