Synthetic Rubber: The billion dollar synthetic rubber industry

October 12, 2018

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Hit by trade wars and economic volatilities, the synthetic rubber sector is anchoring in the robust automotive sector to stay afloat, says Angelica Buan in this report.

The ongoing trade war between the US and China has escalated to the point that many industries are now nearly hanging by a thread. The synthetic rubber industry has not been spared from the fiasco, after China recently announced that it is levying a 10% tariff on various synthetic

US-Chinarubber and tyre products coming from North America. This is a reprisal from the US’s plan of exacting a 10% duty on an estimated US$200 billion worth of imports from China, including synthetic rubber and tyre products from China, and further increasing it to 25% by January 2019.

That being said, and amid speculations on how these banters would affect the rubber industry, analysts still have high hopes for the sector.

Market takes the bull by its horns

The synthetic rubber market is anticipated to remain bullish on account of a bustling automotive sector, and is predicted to be worth US$38 billion by 2022, research group Markets and Markets denoted.

A major driver for synthetic rubber is the rising demand for tyres, globally, pegged to exceed by 4% to 3 billion units/year through 2019. Apart from tyres, footwear, industrial goods and other applications are steering the growth of synthetic rubber.

During this period, the Asia-Pacific (APAC) market will account for over half of total tyre sales, which is indicative of the fastest growth in demand.

tyres

The most important sales market for synthetic rubber in 2017 was tyres, according to German research firm Ceresana. Synthetic rubbers are also used for numerous other products in the automotive industry, like, hoses, cables, seals as well as window and door profiles. Analysts at Ceresana expect an increase of global rubber demand in the automotive industry by 3% per year until 2025.

China, according to Freedonia in its 2015 global tyre report, accounted for nearly a quarter of the global tyre demand in 2014, and buoyed by the growth of its automotive industry, continues on this consumption trend years thereafter.

As well, the acceleration of infrastructure in the country is a harbinger to the country’s industrialised production for key synthetic rubber types, namely, polybutadiene rubber (PBR), used also for tyres and other automotive parts; chloroprene rubber, used in cables, coatings and other automotive and construction components; nitrile-butadiene rubber, used for sealing applications, hydraulic hoses, other oil-resistant applications, and more. Other rubber types are butyl rubber, used for industrial, pharmaceutical and adhesives applications; polyisoprene rubber, used for tyres, pipe gaskets and other mechanical products; EPDM used for seals, radiators, and more; and thermoplastic styrene butadiene rubber widely used in automotive components, shoe soles, and others.

China takes the lead

Touted as the world’s largest producer, consumer and importer of synthetic rubber, China’s output of synthetic rubber reached nearly 6 million tonnes in 2017, increasing by about 3.3% year-on-year, as cited by China Research & Intelligence (CRI) in its report on the Chinese synthetic rubber market from 2018-2022.

As in the global proclivity towards a booming automotive industry, it is also China’s main downstream industry for both synthetic and natural rubber. The former accounts for over 70% of rubber consumption in China, with the main demand coming from vehicle tyres.

From 2018 to 2022, CRI predicts that China’s tyre production will remain the driving force behind the development of the synthetic rubber industry, supported by the “OEM tyre demand from expanding automobile production, the tyre replacement demand from increasing automobile reserves, and the increase in tyre exports”.

Green tyres buoy up growth

Synthetic rubbers for tyre applications are deemed to benefit from the windfall from a robust automotive industry. Specifically, styrene-butadiene rubber (SBR), the most widely used type of synthetic rubber, is anticipated to cross to US$9.12 billion, growing at a CAGR of 3.3% from 2015 to 2023, according to a report by Transparency Market Research (TMR).

A cost-effective alternative to natural rubber owing to its abrasion resistant properties, SBR is widely used in automobile and truck tyres, as well as in many moulded rubber products. SBR in latex form is used as a rubbery adhesive in carpet manufacturing.

The APAC region is anticipated to corner more than 30% share of the global SBR market, as it treads in the direction of undertaking more infrastructural projects, as well as increasing production of footwear and other fast-selling rubber goods.

Following APAC in terms of market representation is North America, driven by its growing reconstruction activities. The latter’s aviation and automotive industry account for major share of overall demand of SBR, according to Half-Cooked Research in its latest global SBR report.

Green tyres, as the sector gains traction, are attributed to the growing demand for synthetic rubbers. Green tyres are characterised by lower rolling resistance, lower noise emissions and good road grip, to cite a few.

Synthetic rubber for passenger car and motorcycle tyres provides these qualities that are required to achieve fuel economy.

The green tyre market, while still in the nascent phase of growth, cannot be undermined. It is predicted to exceed US$104 billion by 2022, growing rapidly at a CAGR of almost 11% from 2017, according to a latest forecast by Markets and Markets.

Major SR players are forging ahead

This year alone, major players have moved to strike while the iron is hot in the SBR market with expansions and capacity increases.

acrylic-rubber

Japan-headquartered Zeon Corporation is establishing a new subsidiary in Thailand for acrylic rubber (ACM) manufacture and sale.

ACM is a speciality synthetic rubber combining high heat and oil resistance. ACM is broadly utilised in under-the-hood automotive applications such as transmission seals, gaskets as well as intercooler hoses. The demand for ACM is expected to expand steadily in the Asian region, led by production growth of internal combustion and turbo charged-engine powered automobiles.

Zeon’s Thai operation joins its existing ACM manufacturing capabilities in Japan and the US, the company disclosed in a press statement.

Arlanxeo, the Netherlands-based synthetic rubber manufacturer, will soon be taken over by diversified petrochemicals company Saudi Aramco after the latter purchases the 50% stake of its joint venture partner, German speciality chemicals company Lanxess.

Saudi Aramco‘s Senior Vice-President of Downstream, Abdulaziz M. Al-Judaimi, commenting on the proposed acquisition, said that the acquisition is key to Saudi Aramco’s strategy to become the world’s foremost integrated energy and chemicals company. He stressed that the acquisition will accelerate the company’s growth into C4-based chemicals including butadiene and isobutylene.

Arlanxeo

Arlanxeo supplies leading tyre and automotive parts to global manufacturers. As a fully owned subsidiary of Saudi Aramco, Arlanxeo is anticipated to enhance Saudi Aramco’s sustainability efforts to optimise tyre performance-related fuel consumption, which could potentially result in a savings of as much as 7%, and thus will complement Saudi Aramco‘s fuel/ engine R&D strategy, which is focused on increasing mileage efficiency and reducing engine emissions in the future. The transaction is targeted to be completed by end of December.

Pumping up investments

In July this year, Arlanxeo also invested mid-double digit million Euro to modernise its production sites in Triunfo, Brazil, and La Wantzenau, France. As a result of the upgrades, the company says it will be able to produce the more advanced PBR types Nd-BR (neodymium butadiene rubber) and lithium butadiene rubber (Li-BR) for tyre and non-tyre applications in Triunfo in the second half of 2020.

In France, Arlanxeo’s site of the world’s largest nitrile butadiene rubber (NBR) facility, it produces grades that are used in the production of cables, seals, hoses, blankets, and soles for safety and athletic shoes, among other uses. The most important markets are the automotive industry, the construction sector, as well as oil and gas production and processing.

Meanwhile, Arlanxeo is expanding production capacity for chlorophene rubber at its Dormagen site in Germany, to 70,000 tonnes/year that will be available to the market during the first quarter of 2019. The capacity expansion is being undertaken from Q2 2018. Its chlorophene rubber grades are used in the production of cable sheathing, conveyor belts and wetsuits, as well as in adhesive applications, and feature high weather, UV and oil resistance, says the company.

Elsewhere, Indonesian integrated petrochemical company Chandra Asri and French tyre maker Michelin have recently completed construction of their joint synthetic rubber production plant, located in Banten province in Indonesia. The plant built for the two companies’ joint venture, PT Synthetic Rubber Indonesia (SRI), is dubbed as the first of its kind in Indonesia to produce material for environmentally-friendly tyres using Michelin’s proprietary technology.

SRI produces PBR with neodymium catalyst and S-SBR, both of which are utilised for the production of the environmentally friendly tyres, says Michelin. SRI sources the butadiene feedstock from Chandra Asri’s subsidiary Petrokimia Butadiene Indonesia.

SRI’s total production capacity is expected to reach 120,000 tonnes/year. Production commenced in late August, with first batch of the material shipped to Michelin for further production process, the partners said.

Midway of the year, in July, Kumho Petrochemical also began adding lines for acrylonitrile butadiene latex (NB latex) at its facility in Ulsan, in South Korea, to boost its synthetic rubber production capacity to 550,000 tonnes/year. The expansion is scheduled for completion in March 2019.

hydrocarbon-plant

In June, US-headquartered oil and gas company ExxonMobil started production of hydrogenated hydrocarbon resin and halobutyl rubber at its integrated manufacturing complex in Singapore, the company’s largest integrated refining and petrochemical complex in the world.

According to ExxonMobil, the new plants are targeted to enhance the competitiveness and strategic importance of its integrated manufacturing facility in Singapore.

ExxonMobil’s Escorez hydrogenated hydrocarbon resins plant has a capacity of 90,000 tonnes/year and is expected to meet long-term demand growth for hot-melt adhesives used in packaging or baby diapers.

The new 140,000-tonne/year butyl plant will produce premium halobutyl rubber used by manufacturers for tyres that better maintain inflation to improve fuel economy, says the firm.

ExxonMobil additionally reported that the new plants will expand on the flexible steam cracking capability in Singapore, which provides a range of feedstocks for upgraded speciality products to meet growing long-term demand in Asia Pacific.

The Singapore complex also includes a new cogeneration unit at the refinery, bringing the total cogeneration capacity of the site to over 440 megawatts, which will help reduce emissions and support more efficient use of energy.

Meanwhile, plastics and synthetic rubber manufacturer Trinseo opened a plant for S-SBR in Schkopau, Germany, this year. The new facility is targeted to meet the growing demand for S-SBR and by the need for faster innovation cycles in the performance tyre market, Trinseo said.

The production expansion adds additional 50,000 tonnes of S-SBR capacity to the Schkopau site and increases the company’s global S-SBR production by 33%.

In Europe as well, Italian firm Versalis (part of the chemical group Eni) has opened a new facility in Ferrara, Italy, for EPDM to cater to the automotive industry. The EUR250 million investment involved constructing a new production line on land that was reclaimed and duly authorised for renewed industrial use, and the revamping of the existing elastomer plant. The company says the investment will increase overall production capacity by about 50,000 tonnes/year.

Beyond the current line-up of expansions and partnerships, more of these are expected to push the synthetic rubber industry forward and above the trade wars and economic challenges.

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Rubber Prices
(Last Updated: 22 Nov 2018)

Monthly The prices shown above do not include VAT @4% on purchase and expenses towards packing, transportation, warehousing  and other incidentals


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