Butadiene-Vinylpyridine Latex Market Has Changed Fundamentally

By Cao Dayong

1. Stable growth in market demand

Due to the drastic price rise of raw materials in 2005, some tire
producers reduced their operation rate, and some negative
impacts were placed on the butadiene-vinylpyridine latex sector.
Nevertheless, the output of tires in China still reached 318
million pieces in 2005, an increase of 28.3% over 2004. The
demand of butadiene-vinylpyridine latex also increased.
According to statistics, the consumption of
butadiene-vinylpyridine latex in China was 35 thousand tons
(including SBR (styrene-butadiene rubber) latex used in rubber
stock dipping) in 2005, an increase of 25% over 2004. 80% of the
market was occupied by products from domestic producers such as
Zibo Heli Chemical Co., Ltd. The application of domestic
products further expanded and the price performance ratio
further improved. The market share of imported products was
around 20%, and mainly consumed in manufacturing polyester fiber
cord fabrics and high-grade polyamide fiber cord fabrics that
is targeting to export. The price of imported products in 2005
was around 70% higher than 2004. It was also true in the
Asia-Pacific market. Main reasons for the high price included
the price rise of raw materials and the supply deficit caused
by the production suspension and reduction in some units.
   From a long-term point of view, policies concerning the
automobile industry in China will continue to promote the
development of the tire industry. Tire skeleton materials will
surely develop considerably. On April 1st, 2006 China reduced
the excise tax on bias tires from 10% to 3%. (CCR2006, No. 13)
The reduction of the excise tax will lead to a reduction of the
city building tax and the business tax. The bias tire producers
expected to save by 7.7% in handing tax, and their financial
burden will be greatly released. It is expected that the demand
of tire fiber skeleton materials will continue to increase at
an annual rate of 15 - 18% from 2006 to 2010. The demand of
butadiene-vinylpyridine latex will also have a stable growth of
15% and reach 40 thousand tons in 2006.

2.  Increasing internationalization in competition

After ten years' development, the butadiene-vinylpyridine latex
sector in China has changed fundamentally from the pure import
to the participation in international competition through
export. The shift has brought about significant impacts on the
global butadiene-vinylpyridine latex market. The Asia-Pacific
region will remain to be the place with the most brisk demand
of butadiene-vinylpyridine latex in the world in the next 10
years. With the expansion of overseas markets, the growth in the
export amount of butadiene-vinylpyridine latex will be much
higher than the growth in the domestic market demand.
   Attracted by the demand potential in both domestic and
overseas markets, domestic producers have conducted capacity
expansion. Zibo Heli Chemical Co., Ltd. plans to construct
another 20 thousand t/a production line in 2006 to increase the
total capacity to 35 thousand t/a. Other latex varieties will
also be produced in the company.

3. Accelerated process in localization

With the widespread acceptance of domestic latex products in the
tire cord fabric sector, high-end products and export products
in the tire cord fabric sector started to use great quantities
of domestic latex products. Butadiene-vinylpyridine latex
produced in China has squeezed into application sectors occupied
by imported products. Butadiene-vinylpyridine latex produced by
Zeon of Japan has basically withdrawn from the Chinese market.
Pilicord Vp106s produced by Eliokem of France holds a share of
around 70% in the market of imported products. Owing to the rapid
growth of the Chinese market, Eliokem of France and Omnova of
the United States intend to construct joint venture plants in
China. They are seeking partners in China today.

4. Higher requirements in downstream sectors

With the aggravated competition in the tire sector, foreign tire
giants have joined in the competition in the Chinese market and
shifted their strategy from price competition to quality
competition. Higher requirements on skeleton materials have led
to higher requirements on butadiene-vinylpyridine latex. High
viscosity, high bonding strength and high stability have become
the future development orientation of butadiene-vinylpyridine
latex.