Butyl Rubber            

*Metric tons per year, including chlorobutyl and bromobutyl rubber capacity. Commercial production is by copolymerization of isobutylene with isoprene. Halogenated butyl rubber, which accounts for over half of global consumption, is made by reacting butyl rubber in a hexane solution with either bromine or chlorine.

Bayer and Exxon account for nearly 80% of world production capacity for butyl and halobutyl rubbers.

In April of this year, Bayer announced it would close its butyl rubber facility at Sarnia, Ontario, by the fall, citing industry overcapacity and poor margins. At the Sarina plant, about one-half of the capacity is used for chlorobutyl and bromobutyl rubber. In addition to the Sarnia plant, Bayer has 115,000 tonnes of capacity at Zwijndrecht, Belgium, and a joint venture with AO Nizhenkamsk in Tatarstan, with 50,000 tonnes capacity.

Exxon facilities outside the US are located at Fawley, UK (93,000 tonnes) and Notre Dame de Gravenchon, France (56,000 tonnes).

Japan Butyl Company, a 50-50 joint venture between Exxon and Japan Synthetic Rubber Company, has capacity for 80,000 tonnes of butyl rubber at Kawasaki and 25,000 tonnes of halobutyl rubber at Kashima, both in Japan.

Additionally, there are three smaller operations, one each in Russia, India and China. And in Baytown, Exxon has another 50,000 tonnes of capacity, mothballed.

Profile last published 11/8/99; this revision, 6/3/02.

DEMAND
2000: 195,000 metric tons; 2001: 196,000 metric tons; 2005: 208,000 metric tons, projected. Demand equals production plus imports (2000: 75,000 metric tons; 2001: 65,000 metric tons) less exports (2000: 57,000 metric tons; 2001: 48,000 metric tons).

GROWTH
Historical: (1996 - 2001): 1.5 percent per year; future: 1.5 percent per year through 2003.

PRICE
Historical: (1996 - 2001): High, $1.30 per pound, regular grade, works: low $1.20 per pound, same basis. Current: $1.30 per pound, regular grade. Halobutyl rubber is generally priced $0.05 to $0.10 per pound over butyl rubber.

USES
Tires, tubes and other pneumatic products, 80 percent; automotive mechanical goods, 9 percent; adhesives, caulks and sealants, 6 percent; pharmaceutical uses 4 percent; miscellaneous, 1 percent.

STRENGTH
Tires, tubes and other tire products have traditionally been the largest end use for butyl rubber, generally accounting for 75-80% of total consumption. Halogenated butyl rubber, used primarily for liners on tubeless tires, accounted for an estimated 55-60% of total butyl rubber consumption in 2001.

With the closure of Bayer’s plant in Sarnia, Ontario, North American capacity utilization will increase from about 60 percent, to nearly 90 percent.

WEAKNESS
Butyl rubber's fortunes are tied to tires. The tire industry experienced a 6.6 percent decline in original equipment and replacement shipments in 2001 primarily attributable to the economic recession and consumer uncertainty after the September 11th attacks, according to the Rubber Manufacturers Association. The group's Tire Market Analysis Committee estimates that there were over 21 million fewer passenger and commercial tire units shipped in 2001 as compared to 2000's record setting 321 million units, and that this level is not expected to be approached again until 2003. Little or no growth is anticipated for 2002 as the economy begins a slow turn-around but a significant 4.7 percent rebound is forecast for 2003, as the total number of units shipped will be approximately 316 million - just short of 2000 figures.

OUTLOOK
Butyl rubber markets are mature and will at best reflect the growth in GDP. Tire imports will remain a threat to domestic rubber consumption and exports will be hurt recent capacity additions overseas. Closure of Bayer’s butyl rubber plant at Sarnia, Ontario, should balance the supply-demand situation in North America. Projected demand growth through 2005 is 1.5 percent per annum.

HISTORICAL DATA