The tire industry in Europe started the year on a firm note where favourable demand fundamentals for the replacement tire segment maintained strong consumption of upstream Elastomers.

The European tire industry stood strong in 2021 as key economies traced their path towards strong recovery after the 2020 debacle. The tire industry has been boosted by tremendous growth in the replacement tire segment. In contrast, the performance of Original Equipment (OE) tires remains underwhelming due to the automotive industry's sluggish output in the last few quarters.

In Europe, replacement tires for passenger cars and light trucks have been in robust demand as they continue to put impressive numbers. As per the latest assessment, replacement tires have measured significant growth in February 2022, where production increased by more than 10% compared to February 2021. Meanwhile, OE tire growth declined by 11% in February 2022.

OE tire demand has improved marginally for Heavy vehicles. A growth of 1% has been observed in February 2022, while the replacement tire segment flourished and measured a demand growth of over 10% in the same period.

Thriving demand growth in replacement tires has created a wave of optimism for Elastomer procurements in the European market. In contrast, the disappointing performance of OE tires has normalized the overall demand for Elastomers.

Key Elastomers, including Styrene-Butadiene Rubber (SBR), Polybutadiene Rubber (PBR), Halo Butyl Rubber (HBR), and others, observed a significant demand growth in 2021. However, in 2022 market has been comparatively stable and has been witnessing growth at a slower rate. SBR prices have stabilized along with HBR prices in February 2022, indicating normalization in market sentiments throughout Europe. SBR prices in Germany were assessed at Euro 3110-3150 per MT on FD basis, while HBR prices were assessed at Euro 2550-2610 per MT on FD basis.

As per ChemAnalyst, “Elastomers are expected to face cost pressure from upstream feedstocks given the substantial volatility in crude oil and natural gas prices. However, inflationary pressure due to the demand fundamentals is likely to stabilize as OE tire consumption is unlikely to change momentum before H2 of 2022.”