This year’s growth in new US automobile and light truck sales does not necessarily paint a rosy picture for styrene butadiene rubber (SBR) producers
New auto and light truck sales for the first eight months of this year rose by 15% from last year.
Through August of 2012, there were 9,711,044 automobiles and light trucks sold in the US, according to the tracking group Autodata, a gain of 1.2m vehicles from the same period in 2011.
Industry sources forecast that new vehicle sales will reach 14.3m units in 2012.
The new vehicles sold through August this year include at least 38.8m tyres.
The number of tyres on new vehicles is big, but original equipment tyres account for only about a fourth of the total US market, with the remaining three fourths comprised of replacement tyres on older vehicles.
SBR is the basic building block of tyres.
Industry sources say about three fourths of the SBR produced is used for the manufacture of tyres, and about three fourths of those tyres are for passenger cars and light trucks.
The replacement tyre segment has fallen behind early projections for this year.
The Rubber Manufacturers Association (RMA) in August, lowered its 2012 forecast for US tyre shipments from an estimated growth of 2.0% to an estimate of 1.2% because of the sluggish economy.
Drivers trying to cope with the sluggish economy are not replacing their tyres as often as they normally would.
The RMA predicts that replacement tyre shipments in 2012 will drop by 1.7%, about 4m tyres.
The RMA earlier forecast there would be an uptake in replacement shipments in the second half of this year, but North America SBR producers and buyers say they haven’t seen such an increase.
The RMA based its earlier forecast on the idea that the mild winter during the first few months of this year would result in more miles being driven, which in turn would result in a greater need for replacement tyres by the second half.
But many SBR producers and buyers believe sales for the fourth quarter will be flat to down from the third quarter.
In turn, tyre manufacturers have warehouses with many more tyres in inventory than desired. That means SBR producers have material they are trying to sell and buyers do not need a large amount of material as tyre sales are down.
As a result, the SBR market has seen contract prices drop three of the last four months and contract prices showed no change during that one month in which they did not drop.
The April contract price for non-oil grade SBR 1502 was 161-168 cents/lb, which has been the highest in 2012. The September contract price for the same material was 112-122 cents/lb.
Spot prices have also slid, moving from the peak price in April of 178-188 cents/lb to 111-122 cents/lb.
North American SBR producers include American Synthetic Rubber Co (ASRC), Ashland, Firestone Polymers, Goodyear Tyre & Rubber and Negromex.