NBR Prices Surge in South Korea and USA Amidst Interplay of Market Complexities

In the first half of November 2024, Nitrile Butadiene Rubber (NBR) prices experienced a notable 1.6% weekly increase across key exporting nations, including South Korea. This price surge, which was mirrored in importing countries like the United States, defied expectations that lower crude oil and butadiene prices would lead to a softening of NBR costs. Despite a global decline in crude oil prices, particularly Brent and other crude benchmarks, and a drop in feedstock butadiene costs, NBR prices have remained resilient, signaling a complex market dynamic.

Typically, falling crude oil prices would suggest a corresponding decrease in NBR prices, as NBR is derived from petroleum-based butadiene. However, the opposite trend has emerged, with NBR prices continuing to rise. Market participants attributed this counterintuitive price movement to two key factors- persistent strong demand from the automotive sector and rising key feedstock Acrylonitrile (ACN) prices in nations like South Korea, Japan.

While butadiene prices have softened due to reduced demand from China and a boost in OPEC+ oil production, NBR prices in the USA have remained strong. The primary driver behind this price increase was the robust and sustained demand for NBR from the automotive sector, where NBR was crucial for manufacturing components such as seals and gaskets.

In the U.S., auto sales surged by 9.5% in October 2024, driven by strong performances from major automakers such as GM and Ford. The rise in vehicle sales was fueled by increased production of electric vehicles (EVs), the rollout of new 2025 models, and attractive inventory incentives, despite facing regional challenges. This uptick in vehicle sales has led to sustained and increased demand for NBR, which was used in automotive applications such as seals, gaskets, and other components.

Similarly, South Korean automakers reported a 5.8% increase in domestic vehicle sales, further adding to the upward pressure on NBR prices. The recovery of the automotive industry in both the U.S. and South Korea has significantly impacted the demand for NBR, with tight supply and limited production capacity exacerbating the situation. As a result, NBR producers were under increasing pressure, leading to higher prices.

In the week ending 15th November 2024, NBR prices were settled at USD 3,260 per metric ton (MT) for the 41%-66% CFR Los Angeles grade. This pricing reflected the tight supply-demand balance, with inventories remaining constrained despite a slowdown in feedstock costs.

Looking ahead, it is expected that the over in NBR prices would continue, driven by ongoing strong demand from the automotive sector and persistent supply chain challenges. If these conditions remain, NBR prices could experience further increases in the coming weeks.