European Union mulling potential ban on Russian SR imports

OSWIECIM, Poland—As the one-year anniversary of Russia's unprovoked invasion of Ukraine approaches, the talk of synthetic rubber trade has become a front-burner issue.

The European Union is poised to announce a new round of sanctions against Russia to coincide with the Feb. 24 marking of the one-year start of the war. And multiple press reports—including the Polish Press Agency—say that Poland has been lobbying for the EU to impose a ban on Russian imports of synthetic rubber to be among the new sanctions.

Further, some have accused Oswiecim-based Synthos S.A. of lobbying for the SR imports ban as a way to increase prospects for its own business with European tire makers. There also were accusations that Synthos had timed the restart of production of butadiene rubber at its factory in Schkopau, Germany, in March, shortly after the proposed SR imports sanctions could take effect.

A Synthos spokeswoman confirmed to Rubber News that Poland has requested the ban on Russian imports of synthetic rubber, and that Synthos had lobbied for the sanctions. But the firm said the imminent recommissioning of the German facility is not related to the potential ban.

She said the SR producer previously kept quiet on media coverage of Russian sanctions in conjunction with Synthos, but believes it is important to comment now with the recent allegations.

Given Poland's position as a bordering nation to Ukraine, the Polish SR producer has been a strong supporter of its neighbor since the war began.

"Synthos has never been ambivalent about its support for Ukraine. However, we understand that our position can only be understood by those who see the effects of the Russian invasion on a daily basis," Synthos said in a statement, first supplied to European Rubber Journal and also shared Feb. 14 with Rubber News.

"Therefore, it is important for Synthos and all our employees to reiterate that Synthos will continue its unwavering support to Ukraine as long as many of our colleagues and local suppliers are still hosting Ukrainian refugees (often family members) and the people of Ukraine are facing Russian aggression."

Synthos also rebuked the notion that the recommissioning of the BR facility is tied to the potential imminent ban on Russian SR imports. The plant will have the capacity to produce 30,000 metric tons a year of nickel BR, according to the company's statement.

"As far as we know, the butadiene rubber produced in Russia is NdBR, TiBR and LiBR. A presumed link between the restart of our NiBR plant and our support for Ukraine is therefore not appropriate in our view," Synthos said.

The proposal to ban imports of Russian SR is not without opposition. Multiple reports say that Italy, Germany, Hungary, Romania and the Czech Republic are against banning the imports, as tire manufacturers from these nations in the past have relied on Russian supply to meet their production needs.

European tire makers have seen a profound impact from the ongoing war, with a promising first half of 2022 contrasted with falling sales after Russia's unprovoked attack.

Replacement consumer tire sales in Europe started 2022 on a high note, recording a 7.4-percent increase in the first half of 2022 when compared to the same period a year earlier, according to data from the European Tyre and Rubber Manufacturers' Association. Truck tires, meanwhile, posted a 10.3-percent increase over the corresponding period of 2021.

That changed, though, when the impact of Russia's war in Ukraine began to take hold. And those factors helped to create a challenging second half. The consumer tire segment finished 2022 down 2 percent from 2021, the ETRMA said, after dropping by more than 10 percent in the second half of the year when compared to the prior-year period.

Replacement truck/bus tire sales remained steady for the year (up 1 percent) in spite of the sharp 8.2-percent decline in the second half.

"Last year was characterized by two contrasting half-year results for European tire manufacturers," Adam McCarthy, ETRMA's Secretary General, said in a statement. "… There is no doubt the war in Ukraine, and the subsequent increase in energy prices and higher cost of living, have impacted the industry's replacement tire sales in 2022."

While the import of tires from Russia was among the earlier sanctions imposed by the EU, the shipments of SR were allowed to continue. Still, some tire makers within Europe tried earlier in 2022 to stop buying rubber from Russia as a show of support for Ukraine.

Reports indicate they were able to replace roughly two-thirds of their needs from other nations, but often at higher costs, cutting deeply into margins. Industry data said that Russian imports accounted for half of European imports of SR before the invasion, but that percentage dropped to about 30 percent of the imports for 2022.

Because of these actions related to the war, there has been some reorganization of SR trade flows, according to Juan Ramon Salinas, managing director of the International Institute of Synthetic Rubber Producers. With the restrictions the market has put on Russian SR, the nation has been looking to sell its rubber elsewhere.

"We understand Russia is working to export those products to Asia-Pacific," Salinas told Rubber News in a recent interview. "They're looking for a different place to sell the products"

He also said that Russia reportedly is working to expand its SR capacity, though no concrete details have been made public about those plans.

Likewise, Europe has replaced portions of its Russian SR supply with rubber from other regions, but mainly Asia-Pacific, Salinas said. He added that doesn't necessarily mean China, as South Korea, Japan, Taiwan and India are other potential sources.

Sibur Holdings, one of Russia's largest producers of synthetic rubber, said it will make no public comments about the recent reports regarding a potential EU ban on Russian SR imports.

Officials at the firm had said in a late July 2022 call with media that its elastomers business was strong at that time. And despite the tire firms that had curtailed production in Russia, one Sibur official said the SR producer had contractual agreements with major tire producers that both parties—in most cases—wanted to sustain.

"These have been built on long-term relationships," he said on the call. "We are in the top five in synthetic rubber producers. I don't think any tire major can completely work without some consequences (if they) stop doing business with us."

Sibur, though, has had trouble exporting products to North America, it said, because closed shipping lanes have made it more difficult—and costly—to export materials to the continent.

In addition, during a November 2022 U.S, International Trade Commission hearing on an antidumping petition regarding emulsion SBR imported from the Czech Republic and Russia, witnesses said Russian imports haven't been a factor in the U.S. since the Russian invasion of Ukraine. Though the shipments have not been banned, since the start of the war witnesses said the imports have been subject to a 35-percent tariff, making it economically unfeasible to export to the U.S.