Synthetic Rubber Industry Develops Rapidly

1. Rapid output increase

According to the statistics made by the National Bureau of
Statistics of China, the output of synthetic rubbers in China
was 1.632 million tons in 2005, an increase of 11.6% over 2004.
The output of SBR (styrene-butadiene rubber) was the highest,
accounting for 31.5% of the total. Sinopec Beijing Yanhua
Petrochemical Company Ltd. is the largest synthetic rubber
producer in China and the output in the company was 262 thousand
tons in 2005, accounting for 16.1% of the national total.

2. Stable consumption growth

The apparent consumption of synthetic rubbers in China was
around 2.63 million tons in 2005, an increase of 5.6% over 2004.
In the total consumption, the proportion of domestic products
was 60.1%, being 2.5 percentage points higher than that in 2004.
The import amount of synthetic rubbers had no great changes in
2005. The output increase resulted in a slight rise of the market
share for domestic products.
   Synthetic rubbers in China are mainly used in tire and
shoemaking sectors. The consumption in these two sectors
accounts for 65% of the total. In varieties used in the tire
production, SBR and BR (cis-1,4-polybutadiene rubber) have an
abundant supply, IIR (isobutadiene-isoprene rubber) has heavy
import dependence and there is yet no production of halogenated
IIR and isoprene rubber that can replace natural rubber. In
varieties not used in the tire production, NBR
(acrylonitrile-butadiene rubber) and EPR (ethylene-propylene
rubber) still mainly depend on import. The output of NBR, EPR
and IIR in China has reached the design capacity. The increase
of the supply amount will have to come from the new-round
expansion of the capacity and construction of new units.

3. Import and export

The import amount of synthetic rubbers in China was around 1.09
million tons in 2005, a drop of 0.5% from 2004. Import sources
were mainly peripheral countries and regions. The amount
imported from these countries and regions accounted for around
70% of the total. The amount imported from Europe and America
has increased in recent two years. In terms of trade form, the
amount imported in general trade only accounted for around 35%
and the amount imported in processing and installing imported
materials trading accounted for over 50%. Imported products were
mainly used in southeastern coastal areas with concentrated
rubber processing. The consumption in these areas accounted for
over 80% of the total import amount. The proportion was 36% for
Guangdong province and 15% for Jiangsu province.
   The export amount of synthetic rubbers in China is not large.
It was around 91 thousand tons in 2005, an increase of around
7% over 2004. The export amount of BR was around 37 thousand tons
and major exporters were Sinopec Beijing Yanhua Petrochemical
Company Ltd. and Sinopec Shanghai Gaoqiao Petrochemical Company
Ltd. Other varieties with a considerable export amount included
SBR, IIR and SBS (styrene-butadiene-styrene block copolymer).

4. Existing gaps and
constraints

The rubber industry in China has developed rapidly in recent
years, but there are still some problems. Some varieties lack
self-developed core technologies, the production scale is
inadequate and the market share is low. Although a relatively
complete product series has been basically formed, the product
portfolio needs further readjustment and optimization.
     (1) The output and the variety can not meet the domestic
demand: Readjustment to the product portfolio have achieved
initial results, but the status of incomplete product variety
and product series has had no fundamental change. Some special
varieties and brands with high added value still have no
production or very small output. The supply ability lags far
behind compared with the demand in users. For example, the market
share of domestic IIR, EPR and NBR (including NBR latex) is less
than one third. Halogenated IIR used in radial tires and special
polybutadiene rubber used in impact-resistant polystyrene still
has no production. ESBR (emulsified styrene-butadiene rubber)
used in high-grade tires and high-grade rubber shoes mainly has
to depend on import. The output of SBS varieties with high added
value such as SIS (styrene-isoprene-styrene block copolymer)
and SEBS (styrene-ethylene-butadiene-styrene block copolymer)
is relatively low.
     (2) The application proportion of synthetic rubbers is low:
According to the statistics made by the International Synthetic
Rubber Producers Association, the application proportion of
synthetic rubbers in China was 45% in 2004, being lower than the
world average level of 53% and far lower than the level in
advanced countries. The synthetic rubber sector should
therefore increase the application proportion of synthetic
rubbers, actively cooperate with downstream users, conduct new
product development and market expansion and produce new
products as soon as possible to meet the market demand.
     (3) There is a deficit of core technologies: China still
has no synthetic rubber varieties produced with self-developed
core technologies. The high input in introducing technologies
and equipment from abroad has seriously affected the capacity
expansion.

5. Bright development prospect

(1) Further demand growth

The rapid growth of the natural rubber demand and the deficit
of natural rubber resources in China will provide an opportunity
to the development of the synthetic rubber sector. According to
preliminary estimates, the demand of synthetic rubbers in China
will increase at an annual rate of around 6% during the Eleventh
Five-year Program period (2006-2010) and reach 3.21 million -
3.55 million tons in 2010. The demand of the 7 major varieties
(SBR, BR, NBR, CR (chloroprene rubber), IIR, EPR and SBS) will
be 2.35 million - 2.59 million tons.

(2) Rapid capacity expansion

A group of new synthetic rubber units are already being
constructed in China today. They include the 100 thousand t/a
ESBR unit (including 60 thousand t/a low cis-1,4-polybutadiene
rubber) in Sinopec Shanghai Gaoqiao Petrochemical Company Ltd.,
the 100 thousand t/a SBR unit in Nanjing Jinpu Chemical Co., Ltd.
and the 40 thousand t/a EPR expansion unit in CNPC Jilin
Petrochemical Company Ltd. These units have a total capacity of
over 300 thousand t/a and will be completed in 2006 or 2007.
   Besides, as a group of new large ethylene projects will start
construction, butadiene resources will increase drastically and
an adequate raw material guarantee will be provided to the
construction of synthetic rubber units.

Table 1  Major Synthetic Rubber Producers
                    in China in 2005   (thousand tons)
Producer                                Output
Sinopec Beijing Yanhua Petrochemical Co.    262
Sinopec Qilu Petrochemical Co.      207
CNPC Jilin Petrochemical Co.        171
Nantong Shenhua Co.               &nb