SEATTLE—The global synthetic rubber industry remains a market dominated by Asia-Pacific, both in terms of supply and demand, and also is a sector where consolidation continues and overcapacity remains an issue, albeit a bit less in 2018 than in recent years.
Those were some of the key takeaways in the Global Synthetic Rubber Overview delivered by Roxanna Bauza-Petrovic, general director of programs for the International Institute of Synthetic Rubber Producers, during the group's Annual General Meeting, held May 13-16 in Seattle.
Asia-Pacific controls 56 percent of overall SR capacity worldwide, with China accounting for 27 percent and the rest of Asia 29 percent. "The rest of Asia overtook China at the end of 2016 because the majority of new projects and expansions came in this region," Bauza-Petrovic said. "This trend will continue, and we also expect to see some growth in China."
Tire elastomers make up 60 percent of SR capacity, she said, and also have been the main contributor to the overcapacity situation the IISRP has chronicled for the past several years.
"Solution SBR and polybutadiene were growing faster than all elastomers in the past five to seven years, and this is driven by the demand of high performance tires," Bauza-Petrovic said, adding there also has been some growth for EPDM, butyl rubber and a few other SR types.
As for the overcapacity situation, utilization rates overall have improved during the past few years. For the total market, she said operating rates have improved from 71 percent in 2015 to 73 percent in 2017 then 74 percent in 2018.
Breaking out tire elastomers, she reported utilization climbed from just 63 percent in 2015 to 70 percent in 2017 and 71 percent in 2018. Conversely, non-tire elastomers had operating rates of 81 percent in 2015, dipped to 76 percent two years later, before rebounding some last year to 78 percent.
Fewer companies are accounting for the bulk of global SR production capacity, according to the data presented by Bauza-Petrovic. In 2014 a total of 25 companies controlled 80 percent of capacity. A year later, 23 companies accounted for that same 80 percent, and last year there were just 21 SR producers needed to make up that same percentage.
"What has happened here is a combination of two things," she said "The big players are still growing, they are expanding their facilities and we have seen a number of joint ventures formed. But we also have seen some closures."
The IISRP puts current total global capacity at 20.4 million metric tons. It ranked Arlanxeo—now owned 100 percent by Saudi Aramco—as the top overall player, with a bit more than 2 million tons of capacity, followed by Sinopec at 1.5 million. The top five is rounded out by Petrochina at 1.29 million tons, Kumho Petrochemical at 1.19 million tons and ExxonMobil at 980,000 tons, according to IISRP data.
Regarding China, Bauza-Petrovic said the nation has launched the China Manufacturing Initiative 2025, an industrial development plan focused on 10 key sectors. She said it has brought some controversy, first because of tensions between the U.S. and China, but also because of potential breaches of World Trade Organization Rules in terms of intellectual property and trade secrets.
"We will continue to follow up on this initiative and how it will impact the synthetic rubber industry," she said.
The IISRP expects less volatility this year in terms of pricing and raw material supply. Bauza-Petrovic said oil prices have impacted feedstock prices and profit margins for SR producers over the years, but the institute expects steady oil prices this year.