Butadieneis the primary raw material used in the production of many elastomers such as stryene butadiene rubber (SBR), polybutadiene, acrylonitrile butadiene styriene (ABS), stryene butadiene latex, and nitrile rubber among others. It is primarily produced through the steam cracking method but from butane or butene dehydrogenation as well. The demand for synthetic rubbers is heavily influenced by the automotive industry which in turn impacts the butadiene market while the supply is dependant on the ethylene industry– that is a primary product needed for steam cracking method. Thus, the butadiene industry is heavily influenced by the demand-supply forces of other markets.
The global butadiene market is projected to grow at a CAGR of 1.59% to reach a market size of US$15.815 billion in 2025 from US$14.386 billion in 2019. The latter half of the forecast period is projected to be the prime revenue driver based on the anticipated recovery of the auto industry in that period. Simultaneously, the growing investment in the construction industry – boosted mainly by the expanding middle-class population and focus of the government of the emerging economies to provide affordable housing for mass population is further expected to push the demand for synthetic rubber for sealing, roofing, and flooring applications.
The butadiene market is heavily influenced by the overall rubber demand – which in turn is dependant on the automotive and airline industry, primarily for tire applications. The automotive industry was already groing through a phase of slow demand due to weak global macroecenomic condition, with the global vehicles sales declining by 4.49% in 2019, following a 0.01% reduction in 2018 (source: International Organization of Motor Vehicle Manufacterers). However, the COVID-19 pandemic has further aggravated the declining trend, with the global vehicles sales anticipated to decline by more than 20%.
Simultaneously, the tire demand by the airlines industry mainly comes from the replacement market, in which it is estimated that the tire of an aircraft is required to be changed after 250-400 take-offs. The temperory suspension of the airlines operations in major countries is expected to delay the replacement demand for tires in the aviation industry. In the United States, the air traffic fell drastically this year as the country tops the list of most severely hit economies by the COVID-19 pandemic. According to a data from the World Bank Group, USA has more than 6 million confirmed COVID-19 cases with total number of deaths standing up of 184,614. As air travel continues to be restricted, on account of restrictions imposed by the government, air travel revenues are getting affected. In France, the tourism sector, which accounts for nearly 8% of the country’s GDP, was expected to register €50 billion in tourism receipts by this year but the actual numbers are way away from this target. The novel coronavirus disease spread in the country pushed the government to close its borders. Restrictions on air travel by the government have been hurting the air travel market growth across the country. Similarly, the other countries such the United Kingdom and India continues to struggle with protecting its people from the novel coronavirus disease, which, till date, does not have a solid cure, restrictions on air travel can be justified. Even if these restrictions are lifted, number of people travelling by air is still expected to remain low as the fear of contracting the disease would continue to keep many people away from it. In fact, according to the Knowledge Sourcing Intelligence, the airlines revenues are expected to decline by approx. 50% in 2020, in comparison to the 2019 revenues level.
It is projected that the second half of the forecast period is likely to provide better revenue generation opportunties on account of the recovery of the airlines reveneus to the pre-crisis level and improvement in the outlook for the automotive industry. One bright sport amidst the crisis is the positive demand from the medical sector, and specifically – the medical glove market. Medical gloves are a very niche applications for synthetic rubber and any radical changes in its demand is not going to impact the overall demand for synthetic rubber significantly. The medical gloves based on synthetic materials, more specifically, nitrile rubber has been gaining traction in the overall medical glove industry globally. In fact, most of the glove exported by Malaysia – the largest glove producer globally, are made of synthetic material. Anticipating a similar trend, the market growth was initially projected to be around 10.5% in 2020. However, the COVID-19 pandemic has drastically changed the economic landscape, with number of healthcare facilities being converted into COVID-19 facilities on account of rising number of COVID-19 patients. Thus, the projection for synthetic medical gloves market in the COVID-19 scenario is significantly revised upwards – with the overall synthetic rubber based medical gloves market is estimated to grow by almost three times than what was orginially projected in the no COVID-19 scenario in 2020.