The global synthetic rubber market is one where overly optimistic expectations have put the sector in a difficult position.
When things were good, producers put in too much capacity—particularly in China and elsewhere in the Asia-Pacific region. But when growth rates didn't meet these forecasts, that left the SR industry overall looking at operating rates that are below 70 percent, with many firms struggling to be profitable, according to Bill Hyde, senior director of olefins and elastomers for IHS Markit.
"That doesn't mean that every producer is running at those low rates," Hyde said, "but on average that's where we think the industry is. There are some regions where operating rates are higher, and there are some producers, especially when you're talking about polybutadiene and solution SBR, where they have products that are special grades. They are operating at higher rates, and some of them are expanding."
The International Institute of Synthetic Rubber Producers said the overcapacity is most prevalent among the tire elastomers, including BR, SSBR and emulsion SBR, which collectively account for an estimated 58 percent of global capacity.
The Houston-based IISRP has all three SR types with operating rates in the 65-67 percent range. It said there has been confirmation of BR facilities being idled in China, but said the operating rate is improving for this elastomer, as demand last year showed slight recovery in Asia-Pacific and the Europe, Middle East, Africa region.
It also said SSBR is showing an improving operating rate with demand improving in all regions. ESBR, however, still has a stagnant operating rate, with a slight demand recovery in Asia-Pacific.
On the bright side, global SR consumption from 2017-21 is projected to grow at an annual growth rate of 2.5 percent, said the IISRP, which has 23 producer members that collectively account for 80 percent of global SR production capacity.
"In general, we have a certain level of overcapacity worldwide, mainly focusing more in Asia-Pacific," IISRP Managing Director Juan Ramon Salinas said. "Right now, there is a certain level of rationalization of capacity and consumption is growing. Now the situation is improving in general, but of course it will take a while."