OUTLOOK ’18: US SBR likely softer on BD, still faces NR challenge

HOUSTON (ICIS)–US styrene butadiene rubber (SBR) prices are likely to soften year on year in 2018, mostly on upstream butadiene (BD), but still faces a challenge from Asian natural rubber (NR) prices.

SBR prices are typically formula-driven by same-month BD prices, and BD prices are expected to soften in 2018 on increased supply.

Margins for SBR over BD are expected to remain steady year on year, as there is little change to the supply/demand balance.

The US is expected to remain a net importer, although pressure from new tariffs and duties could lead to decreasing imports.

Demand growth for SBR is likely limited to overall growth of the US gross domestic product (GDP) or less, as the tyre sector is a mature one.

Sources have expressed concerns that even with low gasoline prices, US driving habits are shifting to less activity, limiting consumption growth.

Other rubber uses in construction and manufacturing activity are expected to grow alongside overall GDP, sources said.

While imports of NR from Asia remain unlikely, pressure from that sector remains a key focus for US rubber producers.

After a fourth quarter that saw oversupplied NR push down prices of Asian synthetic rubber by $300/tonne or more, a floor appeared to have been reached.

However, the decline cut into margins and led some NR-producing counties in Asia to start cutting back on export volumes available heading into 2018.

Sources said supply of NR still remains on the structurally long side, which could introduce strong downward pressure any time in 2018.

Even with pressure to move away from Asian imports of SBR, material is expected to move into the US, allowing the Asian SBR market to affect pricing in the US.

Major North American SBR producers include Dynasol, Goodyear Tire & Rubber and Lion Elastomers.