Butyl Rubber Prices Increase in US and Europe Amidst Firm Automotive Sector Demand

Novorossiysk (Russia): The Butyl Rubber MV 32-51 prices experienced an increase in both the US and European markets, primarily driven by heightened demand from the downstream automotive sectors. In contrast, the construction sector saw a declining trend. The rising demand in both domestic and overseas markets led to an increased consumption rate of Butyl Rubber inventories.

In May 2024, the Russian Butyl Rubber MV 32-51 market saw a 1.8% rise, settling at USD 1690/MT (FOB Novorossiysk), primarily due to increased demand from international markets. Despite this growth, the domestic automotive and construction sectors in Russia experienced a decline. The surge in the Russian Butyl Rubber market was mainly driven by higher exports to China, supported by a new Chinese government policy aimed at boosting the automotive sector, which increased downstream demand. Market activities were initially subdued due to the May Day holidays, leading to a temporary halt in exports to China. However, after the market reopened, there was a significant increase in exports from Russia to China. The Chinese market saw growth, particularly in the new energy vehicle (NEV) sector, with NEV wholesale totaling 620,000 units from May 1 to 26, marking a 25% year-on-year increase. Vendor performance declined due to logistics delays, while Eurozone construction activity continued to slump sharply, resulting in the fastest drop in construction jobs in four years and a notable decrease in purchases and subcontractor use.

The domestic automotive and construction sectors in Russia remained sluggish this month. The automotive sector witnessed an incline year-on-year but a decline month-on-month. Sales of new vehicles, including cars, light commercial vehicles, trucks, and buses, grew by 58% annually in May 2024, with 146,252 units sold, which is 9% lower compared to April, according to the Ministry of Industry and Trade. The 125,501 new cars and light commercial vehicles sold in May represented a 143.9% increase compared to the same month in 2023, as reported by the Association of European Businesses (AEB).

Similarly, there was a slight increase in the US Butyl Rubber MV 32-51 market, even though the production cost of the commodity decreased. This cost reduction in the production of Butyl Rubber was driven by a 0.8% drop in the prices of Isobutylene, a key feedstock for Butyl Rubber production. Despite this, several factors contributed to the modest uptick in the Butyl Rubber market. Firstly, the increase in the Butyl Rubber market was supported by growth in the downstream automotive sector. Secondly, ongoing disputes in the Canadian railways likely exerted additional pressure on US market participants. In contrast, the construction sector experienced a decline during this period. Additionally, the rising inflation rate in the US impacted market confidence and consumer purchasing power. Higher inflation led to uncertainty and reduced spending, which affected the Butyl Rubber market by influencing overall economic conditions.

In May 2024, total vehicle sales in the United States climbed to 15.91 million, up from 15.78 million in April 2024, according to the National Automobile Dealers Association. Specifically, US new vehicle sales in May totaled 1,444,543 units, representing an 8.8% increase from April and a 5% increase compared to May 2023. Total US vehicle sales for the first five months of 2024 amounted to 6,548,694 units, reflecting a 3.5% rise from the same period in 2023. May 2024 had 26 selling days, one more than in May 2023. The seasonally adjusted annualized sales rate (SAAR) for light vehicles in May 2024 was 16.08 million units, up from 15.60 million units the previous year. Additionally, the gap between Butyl Rubber and Isobutylene prices widened, indicating a bullish market scenario for the commodity.

According to ChemAnalyst, the prices of Butyl Rubber MV 32-51 are anticipated to incline in the upcoming weeks due to the increase in demand from the downstream automotive and construction sectors. It is expected that the Federal Reserve might lower its interest rate, which could boost consumer confidence and may increase Butyl Rubber market activities.