Thermoplastic elastomers to lead growth of U.S. rubber industry.

The U.S. rubber industry shipped 13.7 billion lbs. of tires, molded goods, hoses and belting and a variety of other fabricated products in 1998. The production of these goods required 9.2 billion lbs. of elastomers and 4.4 billion lbs. of carbon black, fillers and other additives, according to the Rauch Guide to the U.S. Rubber industry.

Natural rubber, all of which is imported, is the leading elastomer in physical volume, with production at 2.8 billion lbs. in 1998, or 32% of the total. Other leading elastomers, ranked in order of volume, are styrene-butadiene (SBR), polybutadiene, thermoplastic elastomers and ethylene-propylene, reports the study, published by Impact Marketing Consultants. However, in dollar value, thermoplastic elastomers rank first (table 1).

Table 1 - U.S. production of elastomers 1998

Elastomer                         Million lb.     $ Million

Natural rubber (imported)               2,800         925
Styrene-butadiene                       2,090         880
Polybutadiene                           1,250         540
Thermoplastic elastomers                            2,500
  Styrenic                                400
  Olefinic                                255
  Copolyester                              70
  Polyurethane/polyester                  135
Other                                      40
  Total                                   900

Ethylene-propylene                        660         600
Butyl                                     290         330
Nitrile                                   196         225
Polyurethane                              185         280
Polychoroprene                            160         310
Chorosulfonated
  polyethylene                             60          75
Silicones                                  50         500
All other                                  56         253
  Total                                 8,697       7,418

Elastomer                   Growth rate %/yr.
                                1998-2003

Natural rubber (imported)          1.2
Styrene-butadiene                  1.2
Polybutadiene                      1.2
Thermoplastic elastomers           7.0
  Styrenic
  Olefinic
  Copolyester
  Polyurethane/polyester
Other
  Total

Ethylene-propylene                 2.4
Butyl                              1.1
Nitrile                            1.2
Polyurethane                       3.5
Polychoroprene                     0.5
Chorosulfonated
  polyethylene                    (1.0)
Silicones                          2.5
All other                          1.0
  Total                            2.0%

Forecasting the next five years, the Rauch Guide states that TPEs will grow at 7% annually, spurred by increases in its major end use markets, namely the automotive industry, where they are gaining as window encapsulants and in some under-the-hood applications. Other growth outlets will be medical and comolding applications; the construction industry where TPEs are replacing SBR and crumb rubber; and in such consumer goods as golf club grips, roll coverings for the paper industry and swim fins.

According to the Rauch Guide, tires are the dominant end market, using 8.7 billion lbs. of compounded rubber, or 64% of all U.S. consumption. Over the next five years, gaskets, seals and packing devices are forecast to grow at 3.6% annually, compared to 2.7% a year for tires and 1.9% annually for miscellaneous fabricated goods. Rubber consumption in domestically produced footwear will continue to decline as imports increase their dominance in this product category.

The rubber industry has about average profitability compared to other manufacturing businesses. An analysis of the 12 public companies with greater than 40% of their sales from rubber goods shows that return on equity was 17.2% in 1998. The margin on sales was 5.4%, return on assets 5.8%, and SGA to sales 14.5%. By contrast, the study states that paper companies had a return on equity of 7.7% and paint companies 7.6%.

Whereas less than 20 U.S. companies with 25 plants produce elastomers, and 22 companies with 51 plants manufacture tires, over 1,000 companies produce other fabricated rubber goods. However, the industry is concentrated among the leading manufacturers. Goodyear Tire & Rubber is by far the largest producer of fabricated rubber goods and accounts for 16% of industry shipments. Bridgestone/Firestone, Mich-elin North America, Gates Rubber and Cooper Tire and Rubber round out the top five.

RMA ups fire projections

The Rubber Manufacturers Association (RMA) has revised its 1999 fire shipments projections, reflecting the ongoing strength of the U.S. economy.

Key 1999 market forecasts include:

* Original equipment passenger fires are now anticipated to reach 60 million units, a growth of 5% over 1998 figures.

* Replacement passenger tires are now expected to reach approximately 192 million units in 1999, a 3.4% growth over 1998's record 185.5 million units.

* Replacement light truck (LT) "P-metric" fires (passenger fires with light track appearance and tread characteristics usually found on sport utility vehicles [SUVs]) are projected to grow an additional three million units (over 19%) compared to the 1998 level of 14.5 million units.

* Original equipment "LT" designated tires will also see strong growth, with a projected 17% growth over 1998 - surpassing the eight million unit mark in 1999.

* Replacement medium and wide-base commercial truck fires, which reached 13.7 million units in 1998 - an increase of one million units over 1997 numbers, will add yet another one million units in 1999 for an anticipated level of 14.7 million units.

Principle factors used by the RMA to revise its 1999 projections included the continued strong demand in the tracking sector, the increase of cars and trucks in service, and the record-setting pace of SUVs and light track sales.

Table 2 - U.S. rubber industry raw materials

Type (% of total)              ,000 lb.
Fillers/reinforcements (79)      3,496
Processing aids (13)               560
Antidegradants (5)                 207
Vulcanization
  accelerators (3)                 136
Miscellaneous                       34
  Total                          4,433
Table 3 - U.S. rubber industry shipments

Product       Million pounds
               1998    2003

Elastomers    9,232   10,500
Additives     4,433    5,050
  Total      13,665   15,500

Tires         8,724    9,965
Other         4,941    5,585
  Total      13,665   15,500
Table 4 - U.S. rubber industry products

End use                    $ million      % of total

Tires                         15,500           41
Mechanical molded goods        6,520           17
Gaskets, packings              4,250           11
Hoses and belting              2,815            7
Footwear                         483            1
Miscellaneous fabricated
  goods                        8,220           22
  Total                      $37,788          100%