Here is information that will be of interest to those who purchase HMPSA products regarding  the trend in the raw material market, specifically SBS(Styrene-Butadiene-Styrene)block copolymer.

"Styrene-Butadiene-Styrene block copolymer (SBS) is a unique copolymer with extensive application, largest output, and lowest cost. SBS offers excellent surface friction coefficient, little permanent deformation, great tensile strength, excellent low-temperature behavior, great workability and good electric property. The polymer is extensively used in applications such as shoemaking, asphalt modification, polymer modification, liquid seal materials, waterproof coatings, electric wires, automobile components, electric cables and medical apparatuses among several others. Currently the SBS market continues to face crunch emanating from rising prices of crude oil. The effect of such volatility on end-use applications and regional downstream markets is particularly significant as the industry derives its raw material from the petrochemical industry. Conditions in almost all parts of the world including the Middle East, Eastern Europe, Asia, North and South America, as well as Africa have an increasing global implication on supply and demand for petrochemicals and raw materials. However, the prospects for the global Styrene-Butadiene-Styrene (SBS) Block Copolymer and its development continue to appear positive. SBS sales are expected to increase as a result of global expansion in the compounding and adhesive applications, as well as due to the enhanced penetration of modified asphalts into roadway and roofing construction.

The polymer industry continued to be under pressure driven by supply and pricing dynamics in early 2011. With the supply of raw materials such as butadiene remaining tight and demand improving, the industry currently faces difficulty in competing against other higher-margin industries for supply. Butadiene prices are expected to increase further in future along with a steady rise in demand, which is expected to further spike the prices for styrene-butadiene-styrene (SBS). SBS prices climbed up by 18% in 2010. During the 1st quarter of 2011, prices increased by 5% and are further expected to climb by 5% each quarter for the remaining year. With the price of natural latex rubber reaching new highs in recent years, the industry is witnessing a continuous shift in the tire manufacturing industry, towards styrene-butadiene rubber (SBR) and styrene-isoprene-styrene (SIS). This is expected to further drive the demand for butadiene, hence scaling up the prices for SBS.

Asphalt Modification is the largest end-use application area for SBS in terms of volume sales. SBS is an effective asphalt modifier that is utilized in road asphalt modification and modified asphalt waterproof coiled material. SBS finds extensive application in wall bodies of several structures such as bathrooms, toilets, basements, bridges, cold storage chambers, airports, commercial buildings, highways, high-volume interstates, intersections and others. Market for polymer modification holds substantial potential for the SBS market and finds extensive application in vehicle steering wheels/bumpers, sealing parts and electric components. Polymer modification improves the environmental impact of road construction by enabling lesser need for raw materials and creating a safer and more durable road surface.

Asia-Pacific dominates the global sphere as the single largest and fastest growing regional market for SBS both in value and volume terms, as stated by the new market research report on Styrene-Butadiene-Styrene (SBS) Block Copolymer. The fastest growth in demand for styrene is forecast in the Middle East, China, Eastern and Central Europe, and Central and South America. On the basis of the current announcements for capacity expansion, Mexico, Thailand, India together with other Asian countries are expected to remain the net importers while the US, Japan, Canada, Singapore, the Middle East, and the Republic of Korea, are likely to remain net exporters until 2013.

Key players profiled in the report include China National Petroleum Corporation, Dexco Polymers LP, Dynasol Elastomers, Kraton Performance Polymers, LCY Chemical Corp, Polimeri Europa, ShenZhen Yanshan Petrochemical, Sinopec Baling Company Petrochemical Co., among others."

Key Points:

• Natural gas is the primary driver & is up 34% in 2 months
• Many adhesives market raw materials are derived from natural gas
• Very disruptive outages across the globe in other raw materials
• Old plants in N.A. being shut down or causing unplanned outages restrain supply and increase pricing

Overview:

A number of factors are contributing to an unprecedented escalation in raw materials costs.  ln the past. oil and natural gas prices were largely responsible for the observed fluctuations in raw materials pricing. This is no longer the case as the world's economy now appears to be entering a new paradigm of price pressures - one that relates more strongly to supply and demand rather than directly to energy prices.

Quick Raw Material Review

The waterbase, hot melt, PSA & other adhesives produced by the adhesive manufacturers are in most cases derived from a basic building block of petrochemicals called ethylene.  Ethylene & its by-products are then used to help produce products adhesive manufacturers purchase such as: VAE, VAM, PE, hydrocarbon resins, and various rubber products.

 The petrochemical chain:

 Acids, glycols, butadiene, acrylics, polyols, dextrins, FT & other waxes, aromatics, block copolymers, APAO’s, polyamides, and both natural & synthetic hydrocarbons are all at or near 2 year highs in pricing and moving higher while most finished adhesive prices haven’t kept pace in the same time period.

$$ Currency $$

To complicate matters, the US currency has dropped in value more than 29% on average vs. major currencies in the past 10 years.

This means that our economy is less attractive for importing many adhesive raw materials that would help close the supply/demand gap. While this makes it easier to sell our products overseas, it has a negative impact on prices in the U.S. as the supply of key raw materials become insufficient to keep up with demand

Economic Condition

 GDP growth in the US has rebounded from a -2.6% in 2009 to a +2.8% in 2010.  As general industrial activity in North America has shown signs of recovery in the last 18 months, prices for the most of the petrochemical-based raw materials used in the production of adhesives have increased sharply from lows seen in 2009.

 A primary driver for this increase in North America has been a 34% increase in the price of natural gas and to a lesser extent, and a 21% increase in the price of crude oil from recent lows.

 Added to this is a reduction in available North American adhesive raw material production capacity.  In North America petrochemical producers have idled as much as 30% of available capacity, as many downstream industries have done as well. This is a result of decisions by producers to close or mothball plants during the past 5 years. In 2010, this led to a substantial and in some cases a severe inability of raw material suppliers to ramp back up as the general economy rebounds from the 2009 lows, which has continued into 2011.