The reduction in oil prices has not (yet) reached the commodities used for the production of rubber!

The current development in the oil market has been greeted with relief. It has widely been hoped that a similar development would occur in the markets of rubber commodities.

However, this hope seems to be somewhat premature, as the prices for certain polymers have even gone up:

The price for SBR for example is expected rise further in the 4th quarter, and polybutadiene is likely to follow this trend. The reason for this lies in the feedstock prices for butadiene and the still high utilisation of the production capacities for these compounds.

There is also the added problem that some crackers of crude oil have been, or are in the process of being converted from oil to natural gas. As a consequence, butadiene production is currently low, and the market is expecting further shortages.

NBR is affected by similar changes, as prices have risen dramatically over the last four months by a total of up to 30%.

The price for natural rubber remains generally high, and price reductions in the Dollar markets are of little benefit to European companies due to the weakening Euro. Supply and demand appear to remain unchanged and we do not expect any dramatic changes in this market.

The market for chemicals is retracting further. The closure of China's second largest CBS plant is testimony to this development. Flexsys has announced that it intends to close a production line and to discontinue other products.

The situation is made even more difficult due to the fact that suppliers that were in the past unable to pass on the price increases for commodities are now forced to keep the prices at a high level or to even increase them.

In conclusion, it appears that the prices for raw materials are more influenced by the prices for the direct primary products and by demand than by the crude oil price. A similar development can be seen in fuel prices.

Whether we should welcome a drop in demand in order to stabilise prices is however a question that we rather leave to the economic commentators.

One thing is however certain: long-term price agreements for commodities are not yet in sight, and processors of rubber and compounds will remain forced for some time to accept short-term contracts.