The Halo Butyl Rubber (HBR) prices experienced a slight decline in Europe during December driven by increased material availability in the international market and moderate offtakes. While higher stock levels eased supply constraints, subdued demand in the region and ongoing logistical challenges, including rail congestion and tight shipping capacity, led to supply chain disruptions. As a result, HBR prices adjusted downward, reflecting the broader market’s lower demand and improved supply conditions.

The demand for HBR exhibited mixed trends amid broader economic challenges and a projected 2.6% rise in Eurozone inflation.  In the automotive sector, HBR demand for tires, tubes, and automotive parts is under pressure as Europe's car industry grapples with the disappointing shift to electric vehicles (EVs). High costs, reduced subsidies, and increasing competition from Chinese automakers are deepening the strain.

Meanwhile, stricter EU emissions regulations further add to the industry's challenges. As manufacturers explore international markets, HBR demand will depend on how well the sector adapts to these evolving dynamics. Simultaneously, in the construction industry, subdued activity and weaker demand for adhesives and sealants have restrained HBR usage. Economic contraction, rising inflation, and political instability in France and Germany dampen investor confidence, leaving the construction sector cautious despite modest real estate gains.

Meanwhile, the HBR production rates in the region remained at moderate levels due to a balanced supply of feedstock and rising energy costs as winter approached. Manufacturing output continued its significant contraction, reflecting ongoing challenges in the broader production landscape.

However, a drop in feedstock Isobutylene prices—caused by lower material purchases from downstream industries and an abundant supply in the regional market—negatively impacted the cost structure of HBR production. As a result, manufacturers faced challenges in managing production costs amid fluctuating feedstock prices and increased energy expenses.

Meanwhile, supply chains have faced significant hurdles recently. At the beginning of the month, a storm in the northern region caused rail congestion, delaying shipments to domestic buyers. Meanwhile, reduced shipping capacity to Northern Europe, down 11%, and tight space in the Mediterranean trade lane added pressure on international exports. These disruptions led to a build-up of HBR inventory in the region as manufacturers and exporters struggled with delayed deliveries and limited shipment space. In response, suppliers slightly lowered their prices to manage the logistical challenges and keep business moving.

In January, HBR prices are expected to soften due to a combination of factors. With upstream crude oil prices anticipated to decline, operational costs for HBR production are likely to decrease, adding further downward pressure on prices. At the same time, the market is expected to remain well-supplied, and low offtakes are likely to persist, which could further contribute to the easing of HBR prices in the upcoming month.