C O N T E N T S

BUTADIENE AND
DERIVATIVES

Acrylonitrile-Butadiene-Styrene

Butadiene

Styrene Butadiene Rubber

 S&D Outlooks - Butadiene and Derivatives
ACRYLONITRILE-BUTADIENE-STYRENE
Q4 2018 - Market Review
Supply
EUROPE
Acrylonitrile-butadiene-styrene (ABS) supply in the
fourth quarter started out lengthy after a weak
September for producers. The market avoided any
squeeze caused by low water levels on the Rhine
because of an abundance of material. Any oversupply
was exacerbated by a continuous supply of cheap Asian
imports due to weak prices in China. The closure of Elix’s
plant in Spain did not impact on availability.
Demand
EUROPE
A Q4 market recovery was delayed, exacerbated by a
slowdown in the automotive industry caused by the
EU’s stricter emissions regulations. November was
weaker than usual and out of kilter with traditional
buying behaviour. Although December is typically a
time for de-stocking, plummeting feedstock costs made
prices more appealing and stimulated a recovery at the
end of the year.
Q1 2019 - Market Outlook
Supply
EUROPE
Competitive imports are expected to remain a feature
of the market in the first quarter, as demand in China
remains weak. Supply from domestic producers is
expected to be consistent at the start of the year, but
because feedstocks will be impacted by cracker
outages, higher raw material costs could slow
production later in the quarter.
Demand
EUROPE
The long-term outlook suggests that the acryloni-
trile-butadiene-styrene (ABS) market will continue to
grow. In the short-term, however, demand is likely to be
impacted by a range of factors. Demand from the
automotive industry could stay muted, and the
consumer electronics sector may be weaker. Feedstocks
are likely to continue driving prices, and competitive
rates could encourage appetite.
ASIA
Some suppliers in the region reduced output in a bid to
combat mounting stocks. However, tightened supply
could not stoke demand in the region as buyers kept to
the sidelines. Some maintenance shutdowns were also
implemented in the fourth quarter but buyers mostly
bought on a need-to basis. Despite the output cuts,
supply in the region never got into any serious shortage
late last year. Most buyers believed that stocks were
available when needed and were mostly unhurried.
ASIA
Demand for ABS weakened in the fourth quarter as
end-users were hesitant to purchase. The proposed
tariff on appliances made in China amid the US-China
trade row has dampened demand for the resin in the
key Chinese market. Buying momentum across Asia also
tapered off toward the end of the year when the holiday
lull set in. End-users and traders preferred to keep low
inventories as resin prices extended losses for most part
of the quarter.
ASIA
Supply in the region could see an increase if a new
facility in China starts up in the first quarter. However,
given the weak demand, some participants expect the
start-up to be delayed. Otherwise, supply in the region
is expected to stay unchanged with few maintenance
shutdowns planned for in the first quarter.
ASIA
Demand for ABS is expected to remain weak in the first
quarter. Many buyers have delayed commitments to
after the Lunar New Year holidays in early February.
Some sellers anticipate that buying momentum will
continue to stay weak post-holidays amid the US-China
trade. Manufacturing activities are typically in a low ebb
in the first quarter before moving up a notch in the
second quarter.
US
US acrylonitrile-butadiene-styrene (ABS) supply was Increase
stable during the fourth quarter, between domestic
production and imported material. Production capacity
in the Americas increased at the beginning of 2018, as Constant
INEOS Styrolution increased the capacity at its plant in
Mexico by 70,000 tonnes/year to 180,000 tonnes/year.
US ABS prices weakened in November and December
Decrease
amid persistently falling prices for imports from Asia
and the sharp decline on benzene prices. South Korea is
the largest ABS supplier to the US, followed by Mexico
Mixed
and Taiwan.
US
Demand typically drops off in November and December
due to seasonality factors, and that was the case in 2018
as well. The largest ABS demand sector is electron-
ic/electrical, followed by appliance parts. As a net
importer, the US imports about twice the volume that it
exports. Primary destinations for exports in the fourth
quarter were Mexico and Canada, followed by Belgium,
Spain and China.
US
US ABS production has been stable, and no turnarounds
are expected to take place during the first quarter.
Domestic supply will continue to be supplemented by
imports, as the US is a net importer of ABS. Historically,
US ABS prices spike in January, and trend higher for at
least the first quarter. That is not likely to be the case
this month, with falling feedstock prices and the
presence of lower priced imports in the market.
US
Demand will pick up in the first quarter. Rising demand
will increase the need for imported material, which is
being offered at very aggressive prices. Global demand
for ABS resins is expected to be healthy in the first
quarter in the major market segments.
 BUTADIENE
Q4 2018 - Market Review
Supply
EUROPE
European butadiene (BD) supply was mixed through the
fourth quarter. Output constraints persisted because of
the preference for light feedstock cracking and ongoing
planned maintenance outages also kept supplies
limited. Low Rhine water levels impacted both the
producing and consuming sides so the supply and
demand balances were quite fragmented overall. Once
planned maintenances were finally complete, and with
the traditional year-end derivative de-stocking
underway, supply grew but not to the extent to really
distress European producers.
Demand
EUROPE
European butadiene (BD) demand softened through the
fourth quarter. Downstream demand had started to
become sluggish during the previous quarter as
weakening and uncertain Asian markets limited export
opportunities. This started to be felt further up the
chain in the fourth quarter and consumer demand for
incremental BD volumes reduced, then later the
traditional year-end working capital issues took charge.
However, some players said that the year-end
slow-down was not as pronounced as in previous years.
Q1 2019 - Market Outlook
Supply
EUROPE
Sentiment regarding European butadiene supply is
fairly mixed. The US-China trade war uncertainty could
keep buying sentiment cautious and slow so there
could be ample availability at least during the first half
of the quarter if exports to Asia remain limited.
However, a fairly heavy raft of planned cracker and BD
unit turnarounds will be getting underway in the spring
so output will undoubtedly be constrained. The market
could swing between a balanced to tight or balanced to
long supply situation.
Demand
EUROPE
Demand for Europe’s butadiene volumes should be
better than that seen in the previous quarter but there
is a great deal of uncertainty on how strong the pull
might be from key end-market Asia which impacts both
BD as well as BD’s derivatives. Domestic consumers will
likely fulfill all contractual obligations – higher volumes
have been contracted in 2019 according to some
suppliers – at least in the run-up to and during the
spring maintenance season. There is also likely to be
some added demand as some players impacted by the
low Rhine water levels last year, catch-up.
ASIA
Butadiene supply in Asia was relatively
balanced-to-tight in the fourth quarter of 2018 due to
several BD plant shutdowns in China. The extended
shutdown of China’s Shanghai SECCO’s BD units,
totalling 180,000 tonnes/year in the fourth quarter led
to tighter-than-expected supply in China, a key import
market for BD. Deep-sea BD supply from Europe also
dwindled during this quarter because of waning
demand from the derivative synthetic rubber (SR) and
acrylonitrile butadiene styrene (ABS) markets in Asia.
ASIA
Demand for BD in Asia declined during the fourth
quarter of 2018 due to the ongoing US-China trade war
which had seen the downstream synthetic rubber (SR)
and acrylonitrile butadiene styrene (ABS) producers
keeping lean inventories and adopting a cautious
stance. Spot appetite for BD fell as the downstream SR
and ABS makers ran their respective plants at lower
rates, given the slump in demand for SR and ABS amid
escalating tensions in the ongoing US-China trade war.
ASIA
Butadiene (BD) supply in Asia in the first quarter of 2019
is expected to ease as BD plants in China are expected
to resume production following their turnarounds in
the fourth quarter of 2018. Deep-sea supply from
Europe and the Middle East is also expected to increase,
with cargoes from these regions heading to Asia ahead
of the Lunar New Year holidays in early February.
ASIA
Demand for butadiene (BD) is mixed in the first quarter
of 2019. Spot interest is expected to pick up for January
shipments on re-stocking ahead of the Lunar New Year
holidays in early February. However, it is unclear
whether demand will remain firm after the Lunar New
Year holidays, given concerns over the ongoing trade
war between the US and China, the world’s two largest
economies.
US
US butadiene (BD) supply levels improved somewhat
during the fourth quarter of 2018 after a year of
tightness. Improvement came as availability of
feedstock crude C4 (CC4) began to improve. Energy
complex price declines, driven by a $30/bbl drop in
crude futures, made cracking of heavier feedstocks
more economic, yielding additional CC4. Lower
year-end demand patterns helped to lengthen supply.
Prices dropped significantly during this period amid
these factors.
US
US butadiene (BD) demand declined during the fourth
quarter of 2018 on seasonal factors and as companies
transitioned to year-end de-stocking activities.
Relatively high prices at the start of the quarter
hampered some buying interest, but prices began to
decline steeply in November on the back of the crude
price collapse and improved supply levels of feedstock
crude C4 (CC4). Global price declines added further
downward pressure for US-produced material.
US
US butadiene (BD) supply levels are expected to
continue to improve during the first quarter of 2019.
New crackers coming on line will increase supplies of
feedstock crude C4 (CC4) and, in turn, BD. In addition,
crude price weakness could keep cracking of heavier Increase
feedstocks economic if sustained.
Constant
Decrease
Mixed
US
US butadiene (BD) demand should pick up during the
first quarter of 2019 in line with typical seasonal
patterns. Lower US prices relative to earlier in 2018
could spur demand from downstream styrene
butadiene rubber (SBR) buyers as lower costs would
allow them to better compete with SBR import prices.
 STYRENE-BUTADIENE-RUBBER
Q4 2018 - Market Review
Supply
EUROPE
European styrene butadiene rubber (SBR) supply was
balanced-to-lengthy for most of the fourth quarter.
Export opportunities from Europe to Asia were poor as
overseas prices have been on a downtrend for most of
the quarter. Although the arbitrage window to Asia was
mostly closed, there was some export opportunity from
Europe to the US. Spot availability from eastern Europe
was ample, resulting in competitive prices circulating
the European spot market.
Demand
EUROPE
European styrene butadiene rubber (SBR) demand was
tapering off during the last quarter of 2018. Activity was
slow to pick up after the summer holidays, but views on
tyre demand were slightly more optimistic compared
with the non-tyre market. More stringent EU emissions
testing led to a surge in passenger car registrations in
August but figures dropped over in the last quarter of
the year. In December, year-end de-stocking started
early for some and demand decreased in line with
seasonal expectations.
Q1 2019 - Market Outlook
Supply
EUROPE
Market volatility in the upstream butadiene (BD) market
is an area of concern for European styrene butadiene
rubber (SBR) players for 2019. Most canvassed sources
envisage balanced-to-long supply conditions in 2019
despite a heavy upstream cracker turnaround period in
the spring. There is a view that supply levels will be
sufficient in 2019 if the export arbitrage from Europe to
Asia remains closed.
Demand
EUROPE
European styrene butadiene rubber (SBR) growth
projections of growth range from flat to a 1.5% increase
for 2019. While European export opportunities have
been limited in 2018, hopes for 2019 are being pinned
on the recovery of the Asian market. Recovery is mostly
dependent on developments in the US-China trade war.
While growth in western Europe has been mostly stable
over the last few years, central Europe’s growth in tyre
manufacturing is a key area of focus for the
market.There have been several announcements for
new tyre production in central Europe from companies
expanding in this region, which could drive SBR
demand.
ASIA
Styrene butadiene rubber (SBR) supply in Asia was
relatively balanced-to-tight in the fourth quarter of
2018 as the SBR plants in China continued to run their
plants at lower rates of around 50-70% capacity amid
falling demand for SBR. A major South Korean SBR
producer also shut its SBR plant for turnaround in
October-November. Deep-sea SBR cargoes from Europe
and the Middle East however, flowed to Asia in the
fourth quarter, easing the balanced-to-tight supply of
Asia-origin material.
ASIA
Demand for SBR continued to decline in the fourth
quarter of 2018 amid a slowing Chinese economy. China
is the world’s largest automotive market and its falling
vehicle production and sales month on month had
weighed on demand for SBR, which is used in the
production of tyres for the automotive industry.
Demand for SBR continued to weaken during the fourth
quarter of 2018 amid escalating trade war tensions
between the US and China, the world’s two largest
economies.
ASIA
Styrene butadiene rubber (SBR) supply in Asia is
expected to be mixed in the first quarter of 2019 due to
the expected influx of deep-sea SBR cargoes from
Europe and the Middle on arbitrage trades. The SBR
plants in Asia are expected to continue to run their
plants at reduced rates, given the uncertain market
outlook amid the ongoing US-China trade war and a
slowing Chinese economy.
ASIA
Demand is expected to remain soft in Asia in the first
quarter of 2019 due to a slowing Chinese economy.
China is the world’s largest automotive market and the
world’s second largest economy. A slowing Chinese
economy will weigh on demand for SBR, which is used
in the production of tyres for the automotive industry
while the uncertainty amid the ongoing US-China trade
war is likely to curb spot interest in SBR.
US
US styrene butadiene rubber (SBR) supply levels were
plentiful during the fourth quarter of 2018. US
producers faced significant competition from Asian
producers as low SBR demand in China freed up Increase
material for import into the US. Countries without
antidumping duties made a push into the US late in
2018. Material from Asia came in at very competitive Constant
prices, a trend that continued through the quarter.
Lower demand due to seasonal factors ensured that
supply levels remained sufficient.
Decrease
Mixed
US
US styrene butadiene rubber (SBR) demand for
domestically produced product was hampered by
competition from low-priced Asia imports during the
fourth quarter of 2018. Asian producers of SBR pushed
material into the US as demand fell in that region. This
created a disconnect between SBR contract and spot
prices as US producer costs rose while cheaper imports
were plentiful. The US BD market tightened, keeping
SBR costs high. This began to resolve at the end of the
quarter.
US
US styrene butadiene rubber (SBR) supply levels are
expected to remain relatively steady during the first
quarter of 2019. Continued imports will sustain supply
levels that will be more than sufficient to meet demand.
US costs are expected to decline as the BD market
lengthens and crude remains weak.
US
US styrene butadiene rubber (SBR) demand will pick up
in the first quarter of 2019 after typical year-end
de-stocking activity. Continued competition from
lower-priced Asia imports will affect US producers.
However, costs have fallen for domestically produced
material, possibly spurring demand. An uncertain
economic outlook will weigh on market movements.