butadiene/styrene butadiene rubber (epca 2012 presentation)

EPCA 2012 Industry Session Butadiene / Styrene Butadiene Rubber

David Potter, Editor, C4, butadiene

Miguel Cambeiro, Editor SBR

Agenda

• Emergence of butadiene

• Automotive-led price decline begins

• Market dynamics SBR

• New SBR assessments

The emergence of butadiene

Source: Platts On The Net 2007 - 2012

$ /mt

The pricing boom of 2011

Source: Platts On The Net 2007 - 2012

$ /mt

Why did it rise?

• Strong demand from the US, where gas cracking leaves market

net short for Crude C4

• Good domestic demand – especially from the tire sector. (Michelin

records 2nd highest earnings ever. Eur1.29 billion for 2011)

• High natural rubber pricing

Why is the US short?

EthylenePropylene

ButadieneBenzene

Other

Ethane Cracking Yields:

Ethylene 78%Butadiene 2.5%

Source: Platts

Why is the US short?

Ethylene

Propylene

Butadiene Benzene

Other

Light Naphtha Cracking Yields:

Ethylene: 27.9% Butadiene 4.5%

Source: Platts

Butadiene weighs in on cracker margins…

Source: Platts On The Net 2009 - 2012

…but raffinate-1 struggles

Source: Platts On The Net 2011 - 2012

$/mt

2012: The decline begins

Source: Platts On The Net 2011 - 2012

$/mt

Butadiene, SBR relationship in % terms

30%

18% 21%

31%

Synthetic Rubber - Tires Synthetic Rubber -Non-tires Plastics Other

Source: Platts

Automotive getting tired in Europe?

• Bloated volume auto-makers reduce capacity as recession worsens, demand slumps

• Tire-makers follow suit

• However more export-reliant premium producers such as Land Rover-Jaguar see strong demand

Sea change in SBR production

• New technology produced by Japanese and European producers, predominantly under patent

• SSBR set to grow if environmental labelling expands

• Chinese producers currently do not have the technology to produce SSBR, but expected to acquire it by 2014-2015

Investment in butadiene

BASF Antwerp 2014

Versalis Dunkirk 2015

MOL Tiszaújváros 2015

LyondellBasell Wesseling 2013

Source: Platts

SSBR production projects to add capacity

Styron - Schkopau 2012. Expands production to 160 kt/yr

Lanxess – Port Jerome to expand rubber capacity to 140 kt/yr by 2015

Synthos – Krakow to build 100 kt/year plant by 2015

Versalis – new 30 kt/yr 25kt line at SSBR Grangemouth by 2014

Versalis – To build new Ravenna 60kt/yr plant by H2 2015 Source: Platts

NWE SBR recovery in 2013?

• Europe disconnected with Asia, US markets

• Asian BD/SBR, demand and prices rise in September, Europe

weak

• Asian SBR showing around 2% growth but Europe estimated

negative 5-6% compared to 2011

• Asian strength expected to continue in 2013

• Europe expected to recover later

ESBR feedstock contract vs. spot

Source: Platts

1000

1500

2000

2500

3000

3500 70% Butadiene Contract Price + 30% Styrene Contract Price €/mt

70% Butadiene Spot Price + 30% Styrene Spot Price €/mt

Natural Rubber (FOB Sing) €/mt

Natural rubber drives SBR

Asia diverges

$/mt

2012 – January to September

SSBR pricing

• Current SSBR is predominantly traded via term contracts. Low volumes are traded on spot

• It trades as a premium over oil extended ESBR 1723 or 1783 grade

• Premium reflects additional R&D costs and fundamentals

Platts natural rubber assessments

PC0682 Platts Rubber Index Daily/Weekly Averages-05Oct12 Singapore (Platts)--05Oct12/0605 am EDT/ 1005 GMT (US$/kg) FOB Basis On Day Weekly Singapore Change Average TSR 20 Nov 3.06-3.08 +0.00 3.04-3.06 Dec 3.06-3.08 -0.01 3.05-3.07 RSS 3 Nov 3.33-3.35 -0.04 3.34-3.36 Dec 3.34-3.36 -0.04 3.35-3.37 Rubber commentaries can be found on PCA 681, daily prices on PCA 680 and monthly prices on PCA 676.

Platts new SBR assessments

PC0752 Platts NWE SBR Weekly Assessments - 05Oct12 London (Platts)--05Oct12/1204 pm EDT/ 1604 GMT mid change $/FOB Rdam 1500 2400-2410 2405.00 -40.00 1502 2450-2460 2455.00 -40.00 1723 2320-2330 2325.00 -40.00 1783 2255-2265 2260.00 -40.00 5025 3150-3160 3155.00 -40.00 FD NWE Euro/mt 1500 1895-1905 1900.00 -50.00 1502 1935-1945 1940.00 -50.00 1723 1835-1845 1840.00 -50.00 1783 1785-1795 1790.00 -50.00 5025 2535-2545 2540.00 -50.00 (Weekly commentary can be found on PCA753.)