05 September 2011 09:08 [Source: ICIS news]
(recasts for clarity)
By Jing Qi
SINGAPORE (ICIS)--China’s production of treated distillate aromatic extract (TDAE) for tyres is unlikely to grow significantly given the poor demand for the product, which costs 30% higher than the regular aromatics-based rubber oil, industry sources said on Monday.
The country started producing TDAE - considered an environmentally friendly rubber oil which is now required for tyre manufacturing in the EU - this year. The output in 2011 is estimated to be less than 10,000 tonnes, according to the producers of the rubber oil.
China has not been able to start exporting the product yet as only one producer has been able to meet EU standards.
The actual consumption of TDAE within China is at 12.7% of the country’s total rubber oil consumption, which was recorded at 786,700 tonnes in 2010, according to C1 Energy, an ICIS service in China.
Aromatics oil has a bigger share of 38.9% to total rubber oil consumption in the country. Industry sources do not expect much change in the numbers this year.
In terms of cost, high-end aromatic rubber oil in east China is selling at CNY (yuan) 5,700-6,300/tonne ($893-987/tonne) on 5 September, about CNY2,950/tonne lower than the lowest offer for TDAE, according to C1 Energy data.
Unless the Chinese government issues regulations mandating its use, the TDAE is unlikely to be popular with most tyre and rubber product manufacturers, market sources said.
Furthermore, the long period for sample testing slows down the development of the new product.
China usually imports TDAE. It imported 118,000 tonnes in 2010 and is expected to import 120,000-140,000 tonnes this year, according to C1 Energy data.
Adopting the new technology is slow given that the product is still new and sample tests take months to complete.
Foreign tyre makers that have production bases in China, such as Yokohama Rubber (China) and Continental AG Group, have a testing period that runs from four to eight months, said a source with Nantong Hong Sheng International Trade Co.
The export market for TDAE is also limited, with the EU requiring that its member-nations secure supply only from accredited producers in China. Currently, only Binzhou Refinery, a unit of China National Offshore Oil Corporation (CNOOC), is EU-certified.
China has five producers of TDAE. The rubber oil can soften tyres and fill tiny holes in them.
The rubber oil produced by Zhejiang-based Hangzhou Zhongce Rubber - one of China's top three tyre exporters – does not meet all the EU standards for exports, said a company source.
Cheng Shin Tire’s Kunshan factory uses 200 tonnes of TDAE each month, which is just 10% of its monthly consumption, and it has not been growing given limited exports.
Shandong-based Triangle (Weihai) Huasheng Tyre’s consumes 100 tonnes/month of the new product, while its use of aromatics rubber oil is 600-700 tonnes/month.
Cooper Chengshan (Shandong) Tire Co - a joint venture between the world’s eighth largest tyre company US Cooper Tire & Rubber Co and China’s third biggest tyre company Shandong Chengshan Group – consumes aromatics and TDAE at 200-300 tonnes/month each, said a Cooper Chengshan source.
($1 = CNY6.38)
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