US SBR Prices Continue to Plunge Amidst the Declining Feedstock Costs

Texas- The Styrene Butadiene Rubber (SBR) prices in the US market remained on a path of consecutive decline due to decreased prices of its major feedstock (butadiene) in the domestic market. SBR production requires butadiene in larger quantities summarising 75% of the total volume, and the ripple of any price fluctuations in the same showcase its impact on SBR production cost. The US automotive industry and tire manufacturing units remained at a moderate pace as the demand from tire manufacturing units was on a positive note. SBR prices in the first week of August settled at USD 2080 per MT, CFR USGC on August 4th.

According to market participants, the aggressive production schedules in the industry raise concerns about overproduction, leading to increased pricing pressure. This has already begun unfolding in the Electric Vehicle (EV) sector, with Tesla's price cuts prompting other car manufacturers like Ford Motor Company and Lucid to lower their EV prices. After reaching record highs in average car prices last summer, SBR analysts now predict that an excess supply of vehicles could trigger a price war, resulting in a sharp decline in the prices of SBR. Although these price reductions may not materialize until the latter half of 2023, car manufacturers are getting prepared for the possibility, and some EV makers have already started reducing prices. Furthermore, there is already evidence of a general softening in car prices across all market segments, impacting the overall prices of SBR.

Two indigenous groups in Washington state are urging federal regulators to prohibit the use of a chemical commonly found in car tires, which scientists have identified as extremely harmful to salmon and other fish, and a formal request to the US Environmental Protection Agency (EPA) has been submitted. Their petition calls for establishing regulations that would ban the production and utilization of the chemical called 6PPD. In response, the US Tire Manufacturers Association stated that it is currently reviewing the petition putting the SBR manufacturers in a dilemma, and its members are actively exploring potential alternatives to 6PPD. SBR market players anticipate the supply shortage in case the petition succeeds.

6PPD is a commonly used organic chemical that serves as a stabilizing additive in rubber materials like NBR, SBR, and others, which are frequently used in vehicle tires. While it is known for its effective antioxidant properties, its main purpose is to provide outstanding protection against ozone degradation, making it an excellent antiozonant agent. In July, the US economy added new jobs, but revisions to previous months' data indicated a weakening labor market due to Federal Reserve rate hikes aimed at curbing inflation. As per ChemAnalyst, the proportional impact of these will be witnessed on the upcoming SBR prices in the US market, and the SBR price dynamics may continue to decline stagnantly.