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The oil price decline and weakened economies may be nocuous for a number of sectors, but not for the synthetic rubber sector, which is due for further expansion in the coming years, say Angelica Buan and Elaine Cotoner in this report.
The declining price of oil is a windfall for most sectors. For consumers, the price drop improves their purchasing power, to say the least. At the US$30 per barrel mark for the price of crude oil, with expectations of further price declines, it could translate to lower costs for goods, energy and transportation, and narrowed-down inflation, to cite a few basic benefits.
The International Monetary Fund says that a mere 10% adjustment in the oil price corresponds to some 0.2% change in global GDP. However, certain industries are dependent on oil, plus the dull sentiments of major oil producers affected by the low oil prices and further exacerbated by weakened demands from China, Japan, Europe, and the US, are all not a big help to the industry.
On the other hand, the decline of oil prices is making fuel-based products more lucrative for manufacturers relying on the commodity.
Synthetic rubber (SR), which is a crude oil by-product, is now favoured by tyre and non-tyre segment manufacturers, now that prices of SR are declining. In the second quarter of 2015, it was reported that synthetic rubber prices slid by 15% in Europe and 5% in the US, compared to the same period the previous year.
This resulted in an increasing usage of SR. In Europe, for example, utilisation climbed to a ratio of 60% for synthetic rubber versus 40% for natural rubber. This trend is seen to continue, along the still unabated drop in oil prices worldwide.
SBRs make the cut
Styrene butadiene elastomers (SBRs) constitute the largest volumes of synthetic rubber in the world, according to a report by US research house IHS.
There are two major types of SBR: emulsion and solution. Emulsion SBR (ESBR) is continuing to lose ground to solution SBR (SSBR), which is better suited to meet the increasingly stringent specifications of high-performance tyres.
Nevertheless, ESBR grades still account for about 76% of total world capacity as of 2015. However, as most new SBR capacity additions today are based on the solution SBR process, the ESBR share will likely decrease to about 72% by the end of the forecasted period in 2020.
The tyre industry is the dominant consumer of SBR, accounting for more than 75-80% of total demand in 2015. Apart from this, SBR is also used in non-tyre automotive applications, such as conveyor belts, industrial hoses, various moulded and extruded rubber goods, footwear, and other consumer goods. Some grades of SBR, those that are waterproof and free from impurities, are also utilised in the cable industry.
Even though China remains the largest consumer of ESBR, it has exhibited only a comparatively small average annual growth of about 0.6% since 2010. The largest demand growth on a percentage basis was registered in South Korea (6.5%), Taiwan (6.4%), Canada (4.4%), Japan (4.3%), and Africa (4.1%).
Decreasing consumption of ESBR was seen in most of the mature markets: the US, Mexico, Western Europe, and the CIS/Baltic states. Overall, the major consuming regions in 2015 were China (accounting for about 29% of global consumption), the US (14%), Southeast Asia, and South America.
By far the largest capacity additions have been seen in Southeast Asia (Singapore and Thailand), South Korea, and China, which together accounted for about 64% of the total increase.
With a comparatively large average annual growth rate of about 18.5% annually registered for domestic demand in the last five years, China has become by far the largest consumer of solution SBR, surpassing Western Europe and Japan, and is assumed to account for about 24% of the global demand in 2015.
Only demand in Taiwan and the CIS/Baltic states has increased at even higher annual rates (27% and 23%, respectively), while declining consumption levels were seen in Mexico and Japan.
SR growth in Asia Pacific
Research company Transparency Market Research projects favourable expansion for the synthetic rubber market. It reported that the global synthetic rubber market is poised to amp at a CAGR of 5.1% during the period between 2015 and 2023. The report estimates the global synthetic rubber market to be worth US$45 million by 2023. The overall market was valued at US$29 million in 2014.
German research firm Ceresana, in its report, states that more than 12.6 million tonnes of synthetic rubber is consumed yearly worldwide. More than half of global demand is generated in the Asia Pacific region. Due to above-average growth rates, the market share in this region will presumably rise to approximately 56% in 2022.
Additionally, the overall synthetic rubber market has a huge opportunity to grow with the emergence of biobased feedstocks.
Major applications for SR outside the tyre sector are in the manufacturing of technical products such as conveyor belts, roll coverings, hoses, profiles, gaskets, cables, mouldings, and roofing films. For the period between 2014-2022, the expected global demand for rubber in the industrial and construction segments will increase by 2.9% per year.
Meanwhile, nitrile rubber (NBR), a synthetic rubber copolymer of acrylonitrile (ACN) and butadiene, is forecast to enjoy global consumption growth at 4% annually, according to a report by UK-based Merchant Research & Consulting. Asia Pacific will show the highest growth rates, while Europe and North America will exhibit moderate increase.
Rounding out demand with tyres
Application-wise, tyres will account for a significant utilisation rate for synthetic rubber, given SR’s high mechanical strength and abrasion resistance, which are just ideal for tyres.
It is no surprise then that the most important sales market in 2014 was the tyre segment. Almost 60% of total worldwide demand was generated by original equipment tyres and replacement tyres.
Being the world’s largest manufacturer of tyres and a major global consumer of SR, China is forecast to drive consumption beyond the US$12 billion mark by 2020, according to TechSci Research.
This coupled with the strong tyre demand in the country, as well as steady growth of its footwear and adhesive industries, will augur well for SR.
Silicone market growing in construction sector
Silicone, another class of synthetic rubber, is growing in the building and construction application segment in Asia Pacific, according to a report by MarketsandMarkets.
Asia Pacific and Europe are currently the largest markets for silicones in the building and construction application and accounted for a share of about 40.2% and 29.5%, respectively, of the total market size in 2014.
The industrial developments in Asia Pacific are also driving the demand of various silicone materials used in this segment. Despite some production capacities present in developing countries, such as China and India, these capacities have proven to be more export-oriented than in the promotion of domestic growth for the silicone market. China accounts for a significant market share in the global silicone market. However, increasing raw material prices restrict this market’s growth.
Silicone elastomers are used widely in the building and construction industry as silicone sealants for weatherproofing materials and enable innovative applications. Since structural silicone sealants have long-term adhesion, compatibility, and strength required for structural glazing and protective glazing applications, they are used in making sheet glass skyscrapers.
Silicones are inherently waterproof, and they provide greater UV stability, temperature and weather resistance than organic materials, and because they last longer, they can be replaced less often, thus reducing lifetime costs and contributing to sustainability.
To meet this growing demand, key manufacturers from Asia Pacific and Europe are now focusing on the North American market. The demand for silicones in this region is projected to register a CAGR of 6.8% by volume between 2015 and 2020.
The global silicone market size, in terms of value, is projected to reach over US$20 billion by 2020.