London – Synthetic rubber (SR) margins look set to improve significantly over the next few years, according to Anthony Song, director Asia C4 olefins at IHS Markit.
Close to 95% of butadiene – a key SR feedstock – is produced from steam crackers, from which ethylene and propylene account for 70% of the overall revenue globally.
Currently, there is “massive investment” in new ethylene capacity, particularly in the US and China, which will also mean a huge increase in butadiene capacity, Song said at the recent World Rubber Summit 2021.
The trend will benefit SR margins, which have long been under severe pressure following the large capacity additions between 2010 and 2015, the analyst added at the event held virtually 8-11 June.
According to Song, excess SR capacity, built particularly in China, led to fierce competition between the producers, including around the purchase of monomer feedstock.
“The SR spread to butadiene was more than typical operating costs, so that rubber producers were making negative margins for quite some time,” he commented.
With feedstock supply now increasing, and markets recovering, Song said the industry is looking at “a spread of around $800, more comfortable than we had between 2015 and 2019…”
Full report in the July/August issue of European Rubber Journal magazine