China’s synthetic rubber market to face tight supply in Q1 on BD turnarounds

SINGAPORE (ICIS)–China’s synthetic rubber market is expected to face tight supply in the first quarter of 2020 amid a slew of turnarounds for butadiene (BD) units in Asia.

While Zhejiang Petrochemical and Hengli Petrochemical will bring online their new BD units with a total capacity of 340,000 tonnes/year in the first quarter,  the impact of new capacities will be rather offset by a spate of regional turnarounds from January to March.

The concentrated maintenance works will somewhat relieve pressure from domestic new capacities and the new units also need time to achieve stable operation, capping any potential BD downside, participants conceded.

Turnarounds for BD units in Asia in Q1 2020

Country/region	Producer	Capacity (’000 tonne/year)	Time
Thailand	PTTGC	75	Jan-Feb
Thailand	BST	140	Feb-Mar
Taiwan	CPC	130	13 Feb-13 Apr
Japan	JSR	148	Mid-Feb-early Apr
China	CNOOC-Shell	180	Mar
Japan	JXTG Nippon Oil	60	Mar-Apr
Malaysia	Lotte Titan	100	Mid-Mar-Apr

Source: ICIS

As a haze-prone region, Shandong has a large number of synthetic rubber producers and numerous downstream tyre producers.

These producers may be required to cut run rates in the first quarter of 2020 when the regional government will continue to control and treat air pollution due to the meteorological forecast that this winter will face a longer season of fog and haze.

Moreover, most downstream tyre producers will not recover normal production until the Lantern Festival (8 February 2020).

Many downstream tyre producers have built inventories of finished products for sales in the first quarter as the air control and treatment may curb their production, said a participant in east China

But, on the other hand, the Lunar New Year in late January leads to expected limited tyre consumption this month.

Thus, tyre producers are likely to focus on selling their products after the holiday instead of purchasing feedstock, resulting in slower-than-expected recovery in demand for synthetic rubber.

Meanwhile, tight supply and poor demand will keep the synthetic rubber market in a stalemate in the first half of February.

However, March and April are the traditional peak season for tyre sales.

Historical data from the China Association of Automobile Manufacturers showed that the largest month-on-month increases in auto production were usually recorded in March.

On 19 January, prices of non-oil styrene butadiene rubber (SBR) 1502 and high-cis polybutadiene rubber (PBR) in east China closed at yuan (CNY) 11,150-11,300/tonne ex-warehouse (EXWH) and CNY11,100-11,300/tonne EXWH respectively; and BD closed at CNY8,300-8,450/tonne DEL (delivered) east China, ICIS data showed.

Focus article by Aviva Hu

Photo: Display cars at the Auto Shanghai motor show China in April 2019. Synthetic rubbers go into the manufacture of tyres for the automotive industry. (By WU HONG/EPA-EFE/Shutterstock)

($1 = CNY6.85)