Synthetic rubber demand, prices expected to increase

Synthetic rubber demand is expected to rise in 2014, which in turn will increase its price as well as its feedstock price, specifically butadiene.

After a year of sharp decline, butadiene prices are projected to increase gradually throughout 2014, according to William Hyde, senior director of olefins and elastomers at global chemical consulting firm IHS Inc. Hyde projects the increases in 2014 will offset declines in 2013 to return butadiene prices to around the level they were at the end of 2012.

"I think demand is going to strengthen somewhat for synthetic rubber, which will tighten the feedstock market up a little bit," Hyde said. "I think we should see pricing increasing gradually earlier in the year and perhaps faster in the second half than the first half."

Hyde said the volatility of rubber feedstocks likely will not reach the levels of 2011 or 2012, and that most of the change will focus around the butadiene markets. He estimates about 60-65 percent of butadiene goes into synthetic rubber. Synthetic rubber markets are big drivers of the butadiene price.

But butadiene still is probably going to experience some volatility. James McGraw, managing director of the International Institute of Synthetic Rubber Producers, can't remember a time when that wasn't the case.

"Butadiene bounces around all over the place," he said. "It's going to continue to be volatile based upon a number of factors. It's hard to say where the price of butadiene is going to go, but I can tell you it's going to be volatile."

McGraw said one factor is the use of lighter feedstocks by crackers and refineries in ethylene production because of shale gas being readily available. The switch to lighter feedstocks means there is less butadiene being produced as a byproduct of ethylene.

Unlike butadiene, other feedstocks such as ethanol and propylene have larger markets than synthetic rubbers such as EPDM. For example, Hyde said half or more of styrene goes into the polystyrene market in some way, shape or form.

Source: rubbernews.com