Synthetic Rubber Markets Enjoy a Bounce from Low Oil Prices

Originally published 15 December 2015 on IHS Engineering360.

The main use of natural and synthetic rubber is for tire manufacturing. Globally, 70% of all elastomers (natural and synthetic) are consumed for tire and tire products manufacture, says Emanuel Ormonde, IHS Chemical consultant. Approximately, seven gallons of oil are used to produce enough synthetic rubber to make a tire, according to the Rubber Manufacturers Association. Recent lower energy prices result in lower costs for synthetic rubber manufacturers and higher demand as motorists drive more.

Two main areas exist where tire producers could benefit from lower oil prices, says Bill Hyde, senior director of olefins & elastomers at IHS Chemical. On the demand side, if miles driven increase, as they have in the U.S. this year, then tire wear also should increase. “We have not seen significant change in tire demand yet, but it stands to reason that it will happen, at least eventually,” he says. On the supply side, raw material prices have dropped, which has been helpful for tire producers, he says.

One difficulty, however, is that rubber producers can’t fully enjoy the decrease in raw material prices because their sales prices have fallen. What’s more, the synthetic rubber market is plagued by surplus capacity and weak natural rubber market dynamics.

Globally, tire markets are seeing diverse trends. In North America and Western Europe demand is relatively stable. In China, the tire market is something of a disappointment. “The economic conditions there have put significant pressure on the automotive and tire markets,” says Hyde. Furthermore, demand focused on the original equipment (OE) market is growing, but sales into the replacement tire market are disappointing.

Read more at
IHS Engineering360, December 2015.

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