IIR Needs Rapid Development

By Xiao Ming   

Rapid demand growth in the global market

Isobutadiene-isoprene rubber (IIR) has excellent air tightness,
great resistance to heat, aging, acids and alkalis, good
vibration damping and low water absorption. It can be
extensively used in tubes, tire bags, vulcanized bladders,
airtight plies, electric wires/cables, waterproof construction
materials, vibration damping materials and drug bottle cocks.
Only a few countries in the world such as the United States,
Germany, Russia and Italy own the IIR production technology.
According to statistics from SRI, a total of 12 units in 9
countries had the IIR production in 2005 and the total capacity
was 1.146 million t/a. The capacity in the Asia-Pacific region
was 348 thousand t/a, accounting for around 30.4% of the total.
The capacity in North America was 341 thousand t/a, accounting
for around 29.8% of the total. Six units use the patent
technology of Exxon Mobil and 3 of them also produce HIIR
(halogenated IIR). Two units use the production technology of
Lanxess and both of them can produce both IIR and HIIR. Two units
in Russia, 1 unit in Romania and 1 unit in China can only produce
IIR.
    The development of the automobile industry, as well as the
high requirement on vehicle safety and comfort, has accelerated
the progress of the automobile radial tire production technology
and the development of tubeless tires. The total consumption of
IIR in the world has presented a trend of stable increase in the
past few years. The global consumption of IIR was around 848
thousand tons in 2005 and the proportion of HIIR was more than
70%. It is expected that the demand of IIR in the world will
increase at an average annual rate of around 2.0% in the next
few years and reach 918 thousand tons in 2009.

Supply deficit
in the domestic market

China started the IIR research and development in the 1960s, but
no commercial production units were constructed for many years.
In 1999 Synthetic Rubber Factory of Sinopec Yanhua Petrochemical
Company Ltd. introduced technology from PI of Italy and
constructed the only 30 thousand t/a IIR unit in China. The unit
can produce conventional IIR products with 3 varieties including
IIR1751, IIR1751F and IIR0745. Due to factors in technology and
equipment, the output was only 4.1 thousand tons in 2000 and 4.2
thousand tons in 2001. Through the joint technical
de-bottlenecking in collaboration with Beijing University of
Chemical Technology in recent years, the functioning of the unit
has been greatly improved and the output has increase constantly.
The output reached 39 thousand tons in 2005, an increase of
around 3.72% over 2004.
   With the rapid development of the automobile tire industry,
the consumption of IIR in China has grown rapidly. It increased
from 42.4 thousand tons in 2000 to 154.4 thousand tons in 2005
(including 82.4 thousand tons of HIIR) and the average annual
growth rate reached 29.51%.
   IIR in China is mainly used in the tire production. The
consumption of IIR in tire production accounted for around 80.7%
of the total in 2005. It is also used in drug bottle cocks and
the consumption in the sector accounted for around 10.3% of the
total. The consumption in other sectors accounted for around
9.0% of the total.
   As there is a supply deficit of IIR in the domestic market,
import has to be made each year and the import amount is making
a constant increase. The import amount reached 125.6 thousand
tons in 2005, an increase of 27.13% over 2004. The import amount
of conventional IIR was 43.2 thousand tons, accounting for
around 34.39% of the total. The import amount of HIIR was 82.4
thousand tons, accounting for around 65.61% of the total. While
making import, China also has some export of IIR. The export
amount of IIR was 10 thousand tons in 2005.
   The import of IIR in primary forms is mainly made from Russia,
France and Japan. The total amount imported from these 3
countries in 2005 was 20.8 thousand tons, accounting for around
81.9% of the total. The import of HIIR in primary forms is mainly
made from the United States, Canada, Belgium and Russia. The
total amount imported from these countries in 2005 was 33.7
thousand tons, accounting for around 85.8% of the total.

Price fluctuations at the high level

The market price of IIR in China has changed considerably in
recent years. The price of HIIR (imported) in the domestic market
was quite high in the first quarter of 2004, being RMB37 000 -
38 000 per ton. It dropped to RMB35 000 - 36 500 per ton in
following months but increased to RMB39 000 - 40 000 per ton in
October 2004. The price further increased in 2005 from RMB40 000
- 42 500 per ton in January to RMB45 000 - 46 000 per ton in
February. The price continued to go up to the highest level of
RMB47 500 - 48 000 per ton in June 2005 and then started to drop
to RMB45 000 - 46 000 per ton in the third quarter of 2005 and
further to RMB43 000 - 44 000 per ton in the fourth quarter of
2005. The price increased slightly in the first quarter of 2006,
reaching RMB44 500 - 45 000 per ton.
   As IIR produced in China has a relatively low added value,
the price of domestic products is lower than the price of imports.
The price of domestic IIR was RMB17 000 - 17 200 per ton in the
first half of 2004. It started to rise after July 2004 and reached
RMB24 000 - 25 000 per ton in December 2004. Due to the impact
from the price rise of raw materials, the price of domestic IIR
also increased in 2005. It reached RMB25 500 - 26 500 per ton
in February 2005, RMB27 500 - 28 000 per ton in May 2005 and RMB29
500 - 30 500 per ton in September 2005. It started to go down
to RMB27 500 - 28 000 per ton after December 2005. The price
further went down to RMB24 500 - 25 000 per ton in April 2006.
It is expected that the price of IIR and HIIR in the domestic
market will still be influenced by the crude oil price and the
downstream demand change in the second half of 2006, but the
margin of fluctuations will not large.

Bright development prospect

IIR is extensively used in the production of tubes, linings,
vulcanized bladders and tire bags for automobile tires and cart
tires (bicycle, motorcycle, etc.). The rapid development of
radial tires and the constant upgrading of automobile tires have
promoted the consumption growth of IIR in China. Compared with
foreign countries, however, there is still a considerable gap
in the application of IIR in the tire industry. For example, tire
tubes in advanced countries already totally use IIR and the
application proportion of IIR in Southeast Asian countries such
as India, Malaysia and Thailand has also reached 70% - 90%. The
application proportion of IIR in China is less than 30% today.
There is therefore a very big development potential in the
domestic IIR market. According to the Eleventh Five-year Program
(2006-2010) for industrial sectors released by relevant
departments of the state, the tire industry in China will focus
on the development of radial tires and the demand growth of HIIR
will therefore be greatly promoted. The consumption of IIR in
the tire industry (including automobile tires and cart tires)
was around 125 thousand tons in 2005, including around 66
thousand tons of HIIR. It is expected that the consumption of
IIR in the tire industry will reach around 170 thousand tons i