Lanxess flags ‘strong demand’ for synthetic rubber

Shares in Lanxess ticked higher after the synthetic rubber group said that it was trading “very well” despite softer prices of natural alternatives, and forecast a driver to demand from European clampdown on low-performance tyres.

The German group stuck by a forecast, made last month, that its underlying earnings before interest, tax, depreciation and amortisation will rise by about 20% this year.

“The third [July-to-September] quarter is going very well and will be better than the third quarter of last year,” Axel Heitmann, the Lanxess chief executive, said.

The boost reflected “ongoing strong demand” for synthetic rubbers, despite a tumble in natural rubber prices, which for Tokyo’s benchmark contract have tumbled one-third from a high of 535.70 yen a kilogramme in February.

The spot rubber contract reached a record 549.90 yen a kilogramme.

Michael Rollier, the chief executive of French tyre-maker Michelin, forecast last week that natural rubber prices, sapped by waning global economic growth hopes, could see a further decline, if one limited by firm demand, largely from China.

Indeed, Lanxess forecast on Wednesday that global tyre production will rise 25% to 2bn units in 2015.

Cane to cross-plies?

The company highlighted particular promise in the market for premium tyres, which in the European Union are being favoured by legislation coming into force in a year’s time and outlawing some lower-end products missing standards on factors such as fuel efficiency promotion and traction in wet conditions.

“In order to meet the new legislation and the expected customer demand, our high-tech materials are essential,” Mr Heitmann, speaking at a rubber conference in Dusseldorf, said.

South Korea is considering a voluntary labelling scheme based on the EU model, with Brazil and US discussing similar measures.

Lanxess also highlighted that its efforts to diversify from reliance on oil-based raw materials was leading it to the sugar sector, and the production of synthetic rubber made from chemicals refined from cane-based ethanol.

The group said its plant in Triunfo, Brazil would be producing tyres from cane-derived ethylene “by the end of the year”.

Lanxess shares stood 2.0% higher at E38.94 in morning trade in Frankfurt.

Source: http://www.agrimoney.com/news/lanxess-flags-strong-demand-for-synthetic-rubber–3626.html

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