SINGAPORE (ICIS)--Asia’s demand for acrylonitrile butadiene rubber (NBR) has shrunk in the run-up to the Lunar New Year holidays due to slumping downstream automotive sector, with consumption being eroded further by growing production of electric vehicles.
“Demand for NBR has weakened due to the slump in the auto industry which is undergoing a transition to electrification,” a rubber trader said.
The shift to producing more environment-friendly vehicles translates to lesser demand for NBR, which has applications in internal combustion engines.
“The new energy electric vehicles is powered by a lithium ion battery instead of an internal combustion engine, which uses a whole host of auto parts or components [some of which use NBR],” the trader said.
The automotive industry is a major downstream for NBR, which is also used in the industrial, agricultural and footwear industries.
NBR's wide range of applications include automotive transmission belts, hoses, O-rings, gaskets, oil seals, and V belts; as well as synthetic leather, printer's form rollers, rice rollers, disposable non-latex gloves and cable jacketing.
Spot NBR prices were assessed flat at $1,625/tonne CIF (cost, freight and insurance) China since early January, ICIS data showed.
“Shrinking demand is the key reason why spot interest this year in the run-up to the Lunar New Year holiday has dwindled, compared with previous years where restocking usually picks up before the festive holiday,” the trader said.
The Lunar New Year falls on 25 January this year and China is closed for a week from 24 January.
The Lunar New Year is celebrated in both northeast and southeast Asia, including, China, South Korea, Taiwan, Indonesia, Malaysia, Singapore and Vietnam.
The continued slump in the automotive industry in China, the world’s largest auto market, has been weighing on the NBR market in Asia.
For the whole of 2019, China’s vehicle sales declined 8.2% to 25.77m units, with production down 7.5% at 25.72m units, according to the China Association of Automotive Manufacturers (CAAM).
It marked the second year of contraction in the country’s overall car market, with steeper falls recorded for both sales and production compared with 2.8% and 3.3%, respectively, in 2018.
China-US trade frictions, tighter emission rules and cuts on subsidies for new-energy vehicles have been weighing on the car market.
In India, demand for NBR has also slowed down due to weakness in its automotive sector.
India's vehicle sales in December declined 13.1% year on year to 1.41m units, while production for the month fell 5.2% to 1.82m units.
Two-wheelers accounted for about 75% of total sales, and 77% of total production in December, according to the Society of Indian Automobile Manufacturers (SIAM).
Focus article by Helen Yan
Photo: Electric cars in Hangzhou city, Zhejiang, China (Source: Imagine China/Shutterstock)
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