Year in Review: Natural rubber, synthetic rubber markets struggle with volatility

Volatility on the natural and synthetic rubber fronts continued into 2019, though for slightly different reasons.

Synthetic rubber continues to struggle with overcapacity issues, though less so during 2019 than prior years. Roxanna Bauza-Petrovic, general director of programs for the International Institute of Synthetic Rubber Producers, said Asia-Pacific controls 56 percent of overall SR capacity globally with tire elastomers making up 60 percent of the market.

While utilization rates improved overall during the past few years, fewer companies are accounting for the bulk of total global SR production capacity. In 2014, a total of 25 firms controlled 80 percent of capacity. In 2018, that dropped to 21 thanks to a combination of the big players continuing to grow and closures among some of the smaller firms.

The good news is that the IISRP expects less volatility in terms of pricing and raw material supply in the near future.

On the natural rubber front, prices remain cyclical thanks to the operation model of NR planters. According to Maria Gyftopoulou, a senior research consultant at LMC Tyre & Rubber Ltd.—a unit of LMC International consultancy based in the United Kingdom—when prices are low, nobody plants NR trees, which eventually leads to material shortages that drive up prices and planting. It takes newly planted trees seven years to mature.

In 2018, production levels hit record levels, close to 14 million metric tons, but prices remained low.

Joining forces

Synthomer P.L.C. reached a deal to acquire Beachwood, Ohio-based Omnova Solutions Inc. for $10.15 per share in July in a deal with an implied enterprise value of $824 million.

The acquisition gives Synthomer a stronger presence in North America and its first manufacturing presence in China. Omnova operates 13 manufacturing facilities worldwide, with eight in the U.S., and had about 1,300 employees at the time of the acquisition. The firm produces polymers, dispersions and elastomers.

The deal is a natural fit for Synthomer, which makes aqueous dispersions, both acrylic and vinyl; performance elastomers, including NB rubber latex, SB rubber latex and high-solids SB rubber; and industrial specialties, including specialty chemical additives and non-aqueous-based chemistry.

Synthomer said Omnova's capabilities in performance additives in the paper and carpet industries make it an excellent source for additives for Synthomer's nitrile gloves, coatings for specialty paper and packaging, and carpet compounds.

The deal was approved by Omnova's shareholders in October.

Kraton divests Cariflex

After floating the idea of divesting its Cariflex business in February, Kraton Corp. followed through by reaching an agreement to sell the unit to Daelim Industrial Co. Ltd. for $530 million.

Cariflex makes polyisoprene products that require high purity, comfort, protection and quality. According to its website, Cariflex is free of allergenic proteins found in natural rubber, making it ideal for applications like surgical gloves, medical stoppers, and physiotherapy and tourniquet bands.

Daelim is involved in the petrochemical, engineering and construction businesses, and is part of South Korean conglomerate Daelim Group, which reported sales of $9.8 billion in fiscal 2018.

Texas shutdown

Arlanxeo Holding B.V. disclosed that it intends to move its Keltan EPDM production from Orange, Texas, to facilities in Brazil, Europe and China, closing the firm's only U.S. Keltan production site.

The firm expects the shutdown to be complete in the second quarter of 2020, part of a realignment of its overall Keltan production network. The firm employs about 300 total at the Orange site, which will continue to produce butadiene rubber and hydrogenated nitrile butadiene rubber.

Arlanxeo said it has annual production capacity of about 70,000 metric tons of Keltan at Orange. After the closure, the firm's annual global production capacity will be at about 400,000 metric tons.

Mixing and matching

Other notable moves within the supplier space include:

• AirBoss expanded its mixing sites at Scotland Neck, N.C., and Kitchener, Ontario. The firm added a rubber compounding line with auxiliary systems in Scotland Neck and repurposed an existing, but virtually unused, mixing line at Kitchener;
• DowDuPont completed its split-up into three separately traded companies—Dow Inc., DuPont and Corteva Agriscience, completing a process that began in 2017 with the merger of Dow Chemical Co. and DuPont Co. to form a $130 billion company;
• Akron Rubber Development Laboratory Inc. began relocating to its new headquarters in Barberton, Ohio, a process that the firm said will take about eight years; and
• PPG Industries Inc. added an advanced adhesives and sealants laboratory in Cleveland to address growing mobility trends.