FocusChinese NBR to soften amid capacity expansion, soft demand

30 March 2012 08:46  [Source: ICIS news]

By Alex Feng

SINGAPORE (ICIS)--China’s nitrile rubber (NBR) market may soften further as a result of capacity expansions since 2009 and slow downstream demand, industry sources said on Thursday.

NBR prices have been on a decline for the past month, with major NBR players lowering their offers.

Major producer Lanzhou Petrochemical decreased its offer from yuan (CNY) 28,000/tonne ($4,444/tonne) to CNY26,500/tonne EXWH (ex-warehouse) towards the end of this month from early March.

This week, NBR offers from Lanzhou Petrochemical were cut by CNY800/tonne to CNY26,500/tonne EXWH, while another local producer, Ningbo Shunze Rubber announced its offers at CNY26,500/tonne DEL (delivered).

The decline in prices is a result of weak downstream demand and the recent and impending arrival of supply from domestic producers this year, industry sources said.

NBR capacity in the domestic market reached a total of 165,000 tonne/year by the beginning of 2012, according to data from Chemease, an ICIS service in China.

While the country’s NBR apparent demand was lower by 6,000 tonnes, or 3.3%, from 2010 at 176,000 tonnes in 2011, China’s net import volume was at 80,000 tonnes in 2011, down by 19.4% year on year, the data showed.

“The imports of NBR may continue to decline because of the increasing domestic output,” a NBR market player said.

“As domestic NBR capacity grows, the market may face an oversupply situation, which will lead to frequent fluctuation in prices,” a major NBR player said.

In addition, NBR producers are facing high feedstock costs as butadiene (BD) prices have remained high in recent months.

Asia’s spot prices of BD rose by $150/tonne (€113/tonne) to $3,550-3,600/tonne CFR (cost & freight) northeast (NE) Asia as of 29 March over previous week.

The high feedstock costs have forced Ningbo Shunze Rubber to shut its plant 50,000 tonne/year NBR plant twice in the past three quarters.

The company was running the plant at an average of below 50% during the most of last year, according to Chemease.

Downstream demand is soft from auto industry, electric wire and cable, rubber tubes, belts and shoe manufacturing sectors.

Domestic auto production rose by 0.84% to 18.42m  in 2011, while sales increased by 2.45% year on year to 18.51m vehicles, both hitting the lowest growth rate in the past 13 years, data from China Association of Automobile Manufacturers (CAAM) showed.

China’s GDP growth target for this year was lowered to 7.5%, down from the 8% target that was generally maintained for the last several years, which in turn has dampened market sentiment.

Despite high feedstock costs and soft downstream demand the capacity of NBR production in the country has been expanding rapidly since 2009 and will continue to expand till 2013.

China’s Zhenjiang Nantex Chemical Industry expanded its NBR unit at Zhenjiang in Jiangsu province to 50,000 tonnes/year from 30,000 tonnes/year at the beginning of 2012.

Ningbo Shunze Rubber, started up a 50,000 tonne/year NBR unit at Ningbo in Zhejiang province in June 2011.

Lanzhou Petrochemical, a subsidiary of PetroChina, expanded its NBR plant from 15,000 tonnes/year to 65,000 tonnes/year in the second half of 2009.

In addition, LANXESS-TSRC (Nantong) Chemical Industrial is expected to start up a 30,000 tonne/year NBR plant producing mid and high quality grades of NBR at Nantong in Jiangsu province in the middle of 2012, according to a source from LANXESS.

INSA GPRO (Nanjing) Synthetic Rubber, the 50/50 joint venture of Grupo Kuo and China’s Jiangsu GPRO Group, is expected to start up a 30,000 tonne/year NBR plant in the first quarter of 2014, according to the Mexico-based conglomerate.

($1 = €0.67)

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By: Alex Feng
+65 6780 4359

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