AKRON — When crude prices go up, everything goes up.
This observation — by Yuka Kimoto, director of marketing for Lion Elastomers — is the accepted wisdom in the synthetic rubber market, and with good reason.
Prices for a wide swath of synthetic rubbers have gone sharply up in the past few months, sparked by equally sharp increases in butadiene, methanol and other petrochemical feedstocks.
Considering oil prices alone, there is no reason to believe that feedstock prices — and, with them, SR prices — are coming down any time soon. As of March 30, futures for both West Texas Intermediate Crude and Brent Crude were at a three-week high, at around $50 or so per barrel, indicating bullish prices for anything based on petroleum.
However, according to authoritative sources, butadiene prices are starting to fall.
The reason is another well-known factor, in SR and in every other commodity: supply and demand. In the case of butadiene, there was another issue: location, location, location.
Scheduled and unscheduled maintenance shutdowns for butadiene facilities in Asia and Europe placed limits on the availability of butadiene, according to sources who spoke to Rubber & Plastics News and European Rubber Journal.
An unexpected surge of demand for butadiene in China, starting in the fall of 2016 and continuing into 2017, caused Asian butadiene prices to soar as high as $3,000 per metric ton. North American and European prices, though never as high as in Asia, rose accordingly.
"I wouldn't say there was panic buying, but there was desperation throughout the industry to get the material and do whatever they had to do to get it," said Bill Hyde, senior director, olefins and elastomers for IHS Markit.
"The raw materials price situation has gone absolutely crazy," said Frank Lueckgen, director, BU tires & specialty rubbers, global marketing tires, for Arlanxeo Performance Elastomers.
The pricing situation caused raw materials suppliers to shift more butadiene to Asia, where they could get top dollar for it, according to Lueckgen. This stresses the importance of long-term contracts for SR manufacturers, he said.
A shift from SR to NR in Asia is causing butadiene prices to fall, according to Hyde. We probably can expect SR prices to follow, but once again we've been taught the lesson: the only certainty in SR and petrochemical feedstocks is uncertainty.
This editorial appears in the April 17 edition of Rubber & Plastics News, a sister publication of Tire Business.