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Rubber Is Booming In Southeast Asia

Elastomer producers set up shop in Singapore and Thailand

by Jean-François Tremblay
May 30, 2011 | A version of this story appeared in Volume 89, Issue 22

Credit: Shell
View of the Shell petrochemical complex in Singapore.
Credit: Shell
View of the Shell petrochemical complex in Singapore.

Several Japanese companies and Germany’s Lanxess are breaking ground in Singapore and Thailand to build major new plants to produce advanced elastomers for making tires. The companies are muscling into Southeast Asia because of its growing tire production and the availability of hard-to-get raw materials from local refineries.

Announcements from the rubber producers have come fast and furious over the past year. In May 2010, Lanxess said it would go ahead with a $575 million investment, the largest project in its history, to build a butyl rubber plant in Singapore. Butyl rubber offers high impermeability to air and is used in tire inner tubes.

Then Japanese firms started to announce that they, too, would build tire rubber plants in Singapore, a country where no international tire manufacturer has production facilities.

In October, Asahi Kasei said it would build a plant producing solution-polymerized styrene-butadiene rubber (S-SBR) with an initial capacity of 50,000 metric tons per year in Singapore. S-SBR is another key rubber in high-end tires. Asahi was followed a month later by Sumitomo Chemical, which said it was setting up a 40,000-metric-ton S-SBR plant in Singapore, where it already operates a petrochemical complex. And last December, Zeon declared that it was building, also in Singapore, an S-SBR plant with an initial capacity of between 30,000 and 40,000 metric tons.

After a few months’ hiatus, in March, JSR announced it would build an S-SBR plant with an initial capacity of 50,000 metric tons in Map Ta Phut, Thailand. JSR, which claims to be the world’s leading producer of S-SBR, says the plant may later be expanded to 100,000 metric tons.

The sequence of announcements raises eyebrows, but the explanation is straightforward, according to Hiroshi Yoshida, general manager of Asahi Kasei’s synthetic rubber division. “There is a global shortage of butadiene, and in the future it will become tighter and tighter,” he states.

In Singapore, he says, Asahi Kasei was able to negotiate a long-term butadiene supply contract with Shell, which operates a refinery in the city state and completed construction of a naphtha-based ethylene cracker there in May 2010.

As part of its expansion, Shell built a 155,000-metric-ton butadiene extraction facility. The supply agreement, based on a pricing formula linked to the price of crude oil, is what made it possible for Asahi Kasei to build the plant, Yoshida adds. Similar to the Japanese producers, Lanxess said it selected Singapore largely because of an agreement with Shell to obtain isobutene, the key raw material for butyl rubber.

There aren’t many new sources of butadiene in the world, explains Samuel Liew, an Asia-region olefins and elastomers analyst at the consulting firm Chemical Market Associates. The Middle East is not an option because most petrochemical complexes there are based on natural gas, and butadiene is produced in significant quantities only by crackers that run on naphtha or other liquid raw materials. Likewise, the two ethylene crackers recently announced for the U.S. will be fed by natural gas.

China is building several naphtha crackers, but the country is not an attractive location for producers of advanced rubbers. First, Liew says, China plays a lesser role in the international tire market since the Obama Administration imposed U.S. import tariffs on Chinese tires last year. “That has definitely affected the cost of Chinese tires,” he says.

More important, rubber producers are keen to protect the know-how behind making S-SBR, a technology that Chinese manufacturers have yet to master. The risk of intellectual property loss is great in China because foreign petrochemical producers normally cannot invest in the country without a local partner, Liew explains, and partnership could compromise control of the technology. “If China starts to export S-SBR, Asahi, JSR, and the others will not be able to define their advantage in the marketplace,” he says.

Used in the production of tire treads, S-SBR is a rubber that few companies know how to make. S-SBR allows tire manufacturers to attain the seemingly contradictory goals of fuel efficiency and strong wet grip. Fueled by increasing concern about energy conservation, global demand for S-SBR is booming, says Nobu Koshiba, president of JSR Corp.

In 2010, Koshiba explains, Japan implemented a voluntary labeling system for tires that rates them for rolling resistance and wet grip performance. A similar labeling system will come into effect in Europe in 2012. “In Germany, for instance, drivers go at high speed on wet surfaces, but they also want high fuel efficiency on dry roads,” he says. High-performance tires with S-SBR treads are increasingly sold as standard items on new cars, Koshiba says.

Not all S-SBRs are the same in terms of performance, Asahi’s Yoshida says. Asahi’s S-SBR, he claims, is more successful than its competitors’ at eliminating the traditional trade-off between fuel efficiency and adherence to the road surface.

Generally, a tire manufacturer will create blends of rubbers from several suppliers to produce specific models. Asahi, Yoshida claims, supplies S-SBR to the world’s 10 largest tire manufacturers. “We’re the first choice of some manufacturers, but not others.” Asahi, he adds, is constantly developing new rubber characteristics by working closely with tire companies.

It was a coup for JSR to set itself up in Thailand, Koshiba contends. Not only is Thailand, unlike Singapore, a major tire producer, but the cost of setting up chemical plants in that country is lower. “We quickly ruled out Singapore,” he says. The company has a 49% partner in Thailand’s Bangkok Synthetics, with which it previously collaborated on business ventures. Bangkok Synthetics’ major role in the venture is to supply butadiene, JSR says.

Additional sources of butadiene in Asia should appear in coming years. Indonesia’s Chandra Asri has started construction of a butadiene unit that it expects will come on-line in 2013. In Malaysia, Petronas just announced an oil refinery and petrochemical complex that would supply the C4 fractions necessary for butadiene and isobutene production (C&EN, May 23, page 9). Chances are the two companies are already being courted by the world’s big rubber producers.


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