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Analyst forecasts end to SR volatility in future

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Photo by RPN photo by Edward Noga Bill Hyde, IHS senior director of olefins and elastomers.

Volatility in synthetic rubber, natural rubber and rubber chemical markets should lessen in the next couple of years, according to a speaker at ITEC.

But that doesn't mean everything that happens in those markets will be favorable to the industry, said Bill Hyde, senior director-olefins and elastomers for IHS Chemical.

Pricing, supply and demand in the feedstocks sector has been tremendously volatile over the past five years, according to Hyde.

“Pricing trends upstream of the SR market have been to blame,” he said. “Natural gas was pretty volatile for most of the decade, then the bottom dropped out. Crude oil prices increased fairly steadily, then dropped because of the recession, then rebounded.”

The future doesn't look bullish for either rubber or feedstocks, Hyde said.

“Things just aren't going like we hoped they would,” he said. Gross Domestic Product growth in most countries—including the U.S., China, Brazil and the European Union nations—are all below historical averages, he said.

“2014 will be better than 2013, but it still won't be back to the trend line growth rate,” he said.

Butadiene is a co-product of ethylene, the most important by far of all industrial petrochemicals, according to Hyde. With the reduction in miles driven, especially in the U.S., demand for butadiene for SBR production has been soft for the last couple of years.

At one time—between the 1940s and the mid-1970s—butadiene was produced as a stand-alone material, Hyde said.

But except in Russia and a few other countries, that no longer occurs, and ethylene producers are becoming less interested in co-products.

“Ethylene production is moving in a direction that is not good for the production of butadiene,” he said. “This will cause adjustments to the butadiene value chain.”