Rubber ducks out of newbuilds

19 September 2005 00:01  [Source: ACN]

Producers of synthetic rubber are in no rush to build new plants, despite forecasts of steady demand growth.

The projects list (see table) for styrene butadiene rubber (SBR) and polybutadiene rubber (BR) is short, as demand for both products needs to catch up with installed capacity. And concerns about butadiene availability has also forced some producers to go slow on investments.

The International Rubber Study Group (IRSG) expects world rubber consumption to rise from 20.03m tonne in 2004 to 20.74m tonne this year and 21.52m tonne in 2006. Partly influenced by the continued strength in the prices of crude oil and synthetic rubber, IRSG expects natural rubber consumption to rise rapidly, by 6.6% in 2005 (from 8.28m tonne to 8.82m tonne) and 3.8% in 2006. This compares with predicted rises of 1.4% in 2005 (from 11.75m tonne to 11.92m tonne) and 3.9% in 2006 for synthetic rubber.

As for SBR, the International Institute of Synthetic Rubber Producers (IISRP) estimated last year that global capacity was 4.21m tonne as against demand of 3.4m tonne in 2003. BR capacity totalled 3.07m tonne while demand was only 2.12m tonne in 2003. It projected an average annual demand growth of 3.9%/year for SBR and BR until 2008.

Mike Smith of DeWitt & Co forecasts a global demand growth of 2.3-3.0%/year for SBR and BR. With Asian economies likely to grow faster than Western Europe and the US, Asian demand growth is set to be higher at 3.0-3.5%/year for SBR and 4%/year for BR.

On the supply side, Smith said there was not a lot of capacity being built. ‘In Asia, we are looking at a 2.5-3.0% capacity growth for SBR. As there are not many announced projects for BR, there could be a supply crunch in 2008-09.’

The lack of interest in new projects for SBR and BR is a result of overcapacity. Smith expects the average global operating rate for SBR to be only in the mid-70s in 2006 – similar to 2004 and 2005. The few projects that have been planned are mainly in Asia where consumption and capacity growth are almost level.

The rise of Asia as a production centre will result in changes in trade flow. ‘We are seeing some volume of SBR moving around the world. But looking ahead, we are likely to see more intra-regional trade,’ said Smith.

Among the projects outside Asia, International Speciality Products has drawn up a plan to nearly double its emulsion SBR production at Port Naches, Texas, US. The installation of new reactors and finishing lines will raise capacity here to 340 300 tonne/year.

In Brazil, Petroflex plans to expand its synthetic-rubber capacity by 21 000 tonne/year to 146 000 tonne/year in H2 2007. It is also considering an expansion in Rio Grande do Sul by 50 000 tonne/year to 126 000 tonne/year.

But it is China that is attracting the most investments. The IRSG’s Prachaya Jumpasut said the ‘China factor’, which propped up global rubber growth in recent years, was set to continue for at least five more. This would keep global average growth at 3.5%/year – the longest span since the early 1970s.

‘The Chinese rubber industry has grown impressively in recent years, at an average 11% since 1990. It is now of strategic importance within the economy and the world rubber industry.

‘The gap between local output and demand is forecast to continue for the coming years. Our latest projection for China’s rubber demand shows a continued growth of around 7-8%/year to 2009,’ he added.

The IISRP’s prediction is for Chinese SBR consumption to reach 1.05m tonne in 2008, up from 653 000 tonne in 2003. BR demand is forecast to rise from 425 000 tonne in 2003 to 600 000 tonne in 2008.

These forecasts come despite a slight setback in consumption this year (see box). With global automobile and tyre manufacturers racing to expand their presence in the country, Chinese demand is expected to grow in the long term. Bridgestone, the world’s largest tyre manufacturer, has announced plans for its fourth plant in Huizhou, China, for start-up in January 2007. The company already produces passenger-car tyres in Wuxi and Tianjin and truck and bus tyres in Shenyang.

A Southeast Asian synthetic rubber producer estimated that China’s share of the global tyre capacity would rise from 14% in 2000 to 20% in 2005.

Among the major synthetic rubber projects in the country, Shanghai Gaoqiao Petrochemical is building a swing plant capable of producing solution SBR and low cis BR. The project, based on technology from Japan’s Asahi Kasei Chemicals, is due to be completed in the second half of 2006.

In eastern China, Jiangsu GPRO Chemical is working on a 200 000 tonne/year SBR project at Nanjing jointly with Yangzi Petrochemical. In the first phase, a 100 000 tonne/year plant is planned for completion ar end-2006. No start-up date has seen set for the second phase.

Beyond 2007, more SBR investments are in the pipeline. Dushanzi Petrochemical plans to build a 100 000 tonne/year facility while Guangzhou Petrochemical is studying an SBR plant as part of a cracker project.

Another promising market is India, which is also seeing a boom in the auto industry. SBR demand is only 85 000 tonne but growing at 10%/year. BR demand is estimated at 80 000 tonne and growing at 7-8%/year. But a local industry source expects BR demand to grow faster once radial truck tyres become popular. Radial tyres now account for only 2% of the truck tyre market, but the figure is projected to rise to 10-12% by 2009-10.

Indian Petrochemicals Corp Ltd, the country’s only BR producer, recently raised its plant’s capacity to 72 000 tonne/year from 50 000 tonne/year. It is considering adding a 30 000 tonne/year line, but a final decision has yet to be taken.

India relies heavily on SBR imports, but this could change if Reliance Industries goes ahead with a plan for a 100 000 tonne/year plant. The project was mooted nearly two years ago and was initially set to start up in the fourth quarter of 2006. But as work has yet to start, the project is unlikely to be completed before 2007.

Thailand’s ambition to become the Detroit of Asia has spurred investments by global tyre companies. Total SBR and BR consumption is only 80 000 tonne but likely to expand by at least 10%/year. BST Elastomer has no firm plans for expansion but Thai Synthetic Rubber, a joint venture between Ube Industries, Marubeni Corp and Taiwan Synthetic Rubber Corp, has planned a 16 000 tonne/year BR expansion next year.

In Japan, Asia’s largest market, demand has been quite healthy this year, boosted by tyre exports and a growing interest in high-performance tyres. Producers are focusing on producing speciality grades of synthetic rubber. There are no major plans for expansion but companies are keeping an eye open for investment opportunities in China.

Overall, the interest in new projects is weak, although the situation could change once demand and supply balances improve and producers are more confident about feedstock availability.

DEMAND FALTERS BUT WILL BOUNCE BACK

STYRENE butadiene rubber (SBR) and polybutadiene rubber (BR) consumption in China declined unexpectedly during the first six months of this year. BR consumption fell 2.8% year-on-year to 207 000 tonne, while SBR dropped by 3.9% to 297 000 tonne. ?A local producer said demand was affected by a slowdown in the automotive industry. But a key factor, he added, was the low prices of natural rubber which promoted the substitution of synthetic rubber. Many of the smaller converters were also said to have reduced operating rates or even stopped production when synthetic rubber became too expensive.?But producers were confident that the setback would be temporary and that Chinese consumption would rise again.They believed that the lower price of natural rubber was likely to result in limited substitution.?Prachaya Jumpasut of the International Rubber Study Group (IRSG) said world natural-rubber output was not expected to increase sharply because of limitations on the area under cultivation in the major producing countries. World output is forecast to rise from 8.62m tonne in 2004 to 10.027m tonne in 2009.?The recent high synthetic rubber prices could lead to additional planting, but the fruits will not materialise before 2010.

MAJOR SYNTHETIC RUBBER PRODUCERS IN ASIA

Company/location	Product	Capacity*
JSR
Yokkaichi, Japan	emulsion SBR	255 000
	solution SBR	35 000
	EPDM	45 000
Chib, Japan	BR	72 000
Kashima, Japan	EPDM	25 000
Ube Industries
Chiba	BR	95 000
Asahi Kasei Chemicals
Kawasaki, Japan	SBR	103 000
	BR	45 000
Japan Elastomer
Oita, Japan	-	35 000
	-	17 000
Nippon Zeon
Japan	emulsion SBR	60 000
	solution SBR	40 000
	BR	55 000
Mitsubishi Chemical
Japan	SBR	45 000
Taiwan Synthetic Rubber Corp
Kaohsiung, Taiwan	SBR	100 000
	BR	54 000
Chi Mei
Tainan, Taiwan	SBR/BR	200 000
Korea Kumho Petrochemical
Korea	SBR	238 000
	BR	145 000
	NBR	30 000
LG Daesan
Daesan, Korea	SBR	60 000
Daesan, Korea	BR	40 000
	NBR	16 000
Shenhua Chemical
Nantong, China	SBR	120 000
Qilu Petrochemical
Shandong, China	SBR	150 000
	BR	40 000
Jilin Petrochemical
Jilin, China	SBR	150 000
Lanzhou Petrochemical
Lanzhou, China	SBR	50 000
Gaoqiao Petrochemical
Shanghai, China	BR	100 000
Baling Petrochemical
Yueyang, Hunan, China	BR	30 000
Beijing Yanshan
Yanhsan, Beijing, China	BR	140 000
Daqing Petrochemical
Daqing, China	BR	80 000
Dushanzi Petrochemical
Xinjiang, China	BR	50 000
BST Elastomer
Mab Ta Phut, Thailand	SBR	60 000
	BR	40 000
Thai Synthetic Rubber
Thailand	BR	56 000
Indian Petrochemical Corp Ltd
Baroda, Gujarat, India	BR	72 000
SBR = styrene butadiene rubber, BR = polybutadiene rubber, EPDM = ethylene-propylene rubber, NBR = acrylonitrile butadiene rubber; * tonne/year
Source: ACN/ICIS news database, industry

MAJOR SYNTHETIC RUBBER PROJECTS IN ASIA

Company/location	Product	Capacity*	Start up
Dushanzi Petrochemical
Dushanzi, China	SBR	100 000	2008
Guangzhou Petrochemical
Guangzhou, China	SBR	-	post 2008
Jiangsu GPRO Chemical/Yangzi Petrochemical
Nanjing, China	SBR	100 000	end 2006
-	-	100 000	-
Shanghai Gaoqiao
Caojing, China	SBR	41 500	H2 2006
	BR	50 500	H2 2006
Lanzhou Petrochemical
Lanzhou, China	SBR	200 000	2006-07
Qilu Petrochemical
Shandong, China	SBR	100 000	P
Reliance Industries
India	SBR	100 000	evaluating; post-2007
Oil & Natural Gas Corp
Dahej, Gujarat, India	SBR	200 000	2009; P
Company/location	Product	Capacity*	Start up
JSR
Yokkaichi	solution SBR	(x)9000, 44 000T	end-2005
PT Centra
Indonesia	SBR	(x)12 000, 72 000T	2006; P
Indian Petrochemicals Corp Ltd
Vadodara, India	BR	(x) 30 000, 102 000T	S
Taiwan Synthetic Rubber Corp
China	BR	at least 60 000	2008; S
LG Daesan
Daesan, South Korea	SBR	D	2006; S
	BR	D	2006; S
Thai Synthetic Rubber
Thailand	BR	(x)16 000, 56 000T	2006
SBR = styrene butadiene rubber, BR= polybutadiene rubber; *tonne/year, D = debottlenecking, P = planning, S = studying
Source: ACN/ICIS news database, industry

 

 

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