Increasing raw materials prices have in turn led to price increases for various synthetic polymers, and the big question is how long the price spiral will last.
More than a dozen synthetic rubber suppliers in recent months have announced price increases—some of them for multiple product lines—and all blamed the hikes on higher raw material costs. Impacted lines have ranged from chloroprene rubber, EPDM, SBR, nitriles, latexes, fluoroelastomers and various TPEs, among others.
"There have been increases in several materials, but most significant for us has been the global and regional increases in methanol," a spokesperson for Dupont Performance Materials said regarding its Delrin acetal homopolymer resin.
Higher raw materials costs are the sole reason for the current SR price hikes, according to Bill Hyde, senior director, olefins and elastomers, for IHS Markit.
Price increases have been primarily, though not exclusively, in butadiene, Hyde said.
"There are a number of factors in butadiene pricing, generally driven by events in Asia," he said. "It's a combination of planned or unplanned outages at butadiene plants, with strong demand at a time when inventories were low.
"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."
Yuka Kimoto, director of marketing for Lion Elastomers, agreed that butadiene is hard to get.
"Supply is definitely tight," Kimoto said. "I haven't checked the most recent numbers, but I haven't heard that anything has changed."
Lion Elastomers has increased prices on its standard SBR grades twice this year, along with price hikes for its specialty SBR and EPDM grades as well.
Frank Lueckgen, director, BU tires & specialty rubbers, global marketing tires at Arlanxeo, said that production and demand anomalies have skewed pricing for butadiene.
In an interview with European Rubber Journal, a sister publication of Rubber & Plastics News, Lueckgen said that despite major butadiene price hikes in Europe, the region still currently has the lowest butadiene prices in the world.
In Asian markets, where outages at butadiene plants have combined with unexpectedly strong demand from China, butadiene prices have reached as high as $3,000 per metric ton, according to Lueckgen, who told ERJ he was relating his own opinions rather than those of his company.
"That is a major problem, because the butadiene suppliers in the U.S. and in Europe are shipping the raw material to Asia," he said. "They can make much more money on butadiene as before, as the arbitrage window is significant."
Generally, both SR manufacturers and their rubber product manufacturing customers were reluctant to discuss how they were modifying their activities in the face of higher prices. Many tire manufacturers, though, have boosted tire prices in an effort to offset the higher material costs they are paying.
"We are impacted by those input cost increases and have, or will, take pricing actions as an offset while also maintaining a competitive market position," said Bill Caldwell, vice president of sales and marketing for Continental Tire the Americas.
Goodyear pointed to the remarks made by Chairman and CEO Richard J. Kramer at the company's fourth quarter 2016 financial results teleconference on Feb. 8.
"Since our last earnings call, there's been a swing from a low of 67 cents per pound (for natural rubber) to a peak of $1.04 per pound as recently as last week, an increase of an astounding 55 percent," Kramer said.
"And the raw material cost story is about more than just natural rubber, with challenges coming from a broad cross-section of commodities. Prices of key commodities such as butadiene and carbon black have risen to 52-week highs in recent weeks. We expect raw material costs to remain at heightened levels in 2017."
Kramer said he was pleased at how Goodyear responded to higher raw materials prices. "We are confident that we will continue to offset raw material cost increases as we continue to focus on price/mix as a key component of our business," he said.
Anne Noonan, president and CEO of synthetic polymer/performance chemical producer Omnova Solutions Inc., also said her company was dealing with the effects of higher raw materials costs.
"Raw material costs were up for the quarter, and we responded with an increased focus on value pricing for the non-indexed portion of our business while optimizing inventory levels," Noonan said in a press release concerning Omnova's March 29 earnings statement for the first quarter of 2017.
"As we progress into the second quarter, we will continue to execute on our pricing initiatives to drive profitable growth."
Regarding the future, Kimoto said she expected butadiene supplies to stay tight and prices to stay high for the foreseeable future. "I don't know where the price of crude is going," she said. "But when crude prices go up, everything goes up."
Hyde, on the other hand, said butadiene prices are already starting to fall, especially in Asia.
"What happened there is that enough of demand shifted from synthetic rubber to natural rubber," he said. "Butadiene is falling pretty rapidly, and synthetic rubber has also started to come down."