High Expectations on the SBR Market in 2010    

By Gao Yiwen   

With the boom of the domestic automobile market, China's consumption of styrene-butadiene rubber (SBR) hit the historical record of 1.116 million tons in 2009, an increase of 22.2% over the previous year. If the inventory increase of over 40 000 tons in SBR producers at the end of 2008 was counted, the actual consumption of SBR was around 890 000 tons in 2008. In that case, the consumption in 2009 was 25.4% higher than the consumption in 2008. 2009 was the year with the highest consumption growth of SBR in recent years.

China's Supply and Demand of SBR in 2008 and 2009
      (thousand tons)
Year    Output    Imports    Exports    Consumption    Self-sufficiency    Growth of
                                               Rate         consumption
2008    731     204     21.5    913.5       80.0%    -2.5%
2009    844     312     40.1    1 116       75.6%    22.2%
Source: CNCIC


   In spite of some expansions, China's capacity to produce SBR still could not catch up with the rapid increase of local demand in 2009. Moreover, as the demand in the international market was slack and there was oversupply, great quantities of foreign made SBR attempted to enter the Chinese market. China's import amount of SBR created a new historical high in 2009, being 312 000 tons, an increase of 52.9% over the previous year. Import was mainly from countries with SBR oversupply such as Korea, Russia and Japan. China's Ministry of Commerce levied antidumping tariffs on imported SBR. Nevertheless, as importers used the form of processing trade in import and avoided antidumping tariff, import tariff and value-added tax, causing the imported products to have evident advantage over domestically-made products in cost.
   China has already become the biggest SBR producer in the world. The output was 844 000 tons in 2009 and the total capacity was 1.04 million t/a.

Capacity and Output of SBR in China in 2009

Producer
    Capacity (thousand t/a)
    Output (thousand tons)
    Remark
Sinopec Qilu Petrochemical Co., Ltd.
    250
    201
    adding 100 000 t/a in June 2009
Sinopec Shanghai Gaoqiao Petrochemical Co., Ltd.
    60
    24
    SSBR
Nanjing YPC-GPRO Chemical Co., Ltd.
    100
    89
PetroChina Jilin Petrochemical Co., Ltd.
    150
    162
PetroChina Lanzhou Petrochemical Co., Ltd.
    150
    138
PetroChina Dushanzi Petrochemical Co., Ltd.
    100
    0
    SSBR, unsmooth running in 2009
Jiangsu Nantong Shenhua Chemical Co., Ltd.
    180
    198
Bridgestone (Huizhou) Synthetic Rubber Co., Ltd.
    50
    30
Total
    1 040
    842
Source: CNCIC

   In the developed countries the tires and rubber products industries have already been on the drop. The capacity is reducing constantly there, the demand for ESBR is going down and some companies have been forced to shut down old units for capacity control. In China, however, the SBR sector is developing vigorously. More new units will start up in the next two years and China has become the biggest SBR expansion site in the world.
   The brisk demand for SBR in previous years has drawn many domestic investors to enter this sector. The completion of these new units will greatly increase China's production capacity of SBR. While satisfying the needs in the development of downstream sectors, an extremely great pressure of overcapacity will also be brought to suppliers.

China's New and Expansion SBR Projects in the Next Two Years                               
(thousand t/a)
Company
    New capacity (product)
     Planned date for completion
      Remark
Hangzhou Zhechen Rubber Co., Ltd.
    50 (ESBR)
    middle of 2010
    to be expanded to 100 000 t/a
Tianjin Lugang Petroleum & Rubber Co., Ltd.
    100 (ESBR)
    second half of 2010
Fujian Meizhou Bay Chlor-Alkali Co., Ltd.
    100 (ESBR)
    end of 2010 (original plan)
Liaoning Huajin Chemical Industry Group
    100 (SSBR)
    end of 2010
    possibly also producing SBS
PetroChina Fushun Petrochemical Co., Ltd.
    200 (ESBR)    2011
Nanjing YPC-GPRO Chemical Co., Ltd.
    50 (ESBR)
    planning
Source: CNCIC


   The United States started to impose high tariff on China-made tires from September 2009 and the total amount of tires exported by China to the United States reduced. As the tire sector of China had evident competitive advantages, the export amount was restored to normal and hit the year's highest in December. Nevertheless, it does not mean that the impact was over. The high tariff measure will be implemented for three years and the impact on China's tire sector will last in a long term.
   According to China Automobile Industry Association, the automobile industry of China will present a sound development trend in 2010. The output growth of automobiles is expected to be around 10% and the output will hopefully reach 15.0 million units. The demand for SBR in the automobile sector will therefore increase further. Based on an average monthly consumption of 100 000 tons, the demand will be more than 1.20 million tons in 2010, an increase of more than 7% over the previous year.
   As China's new SBR production facilities will mostly start production in the second half of 2010, its contribution to the yearly total output will not be great. The actual total output in 2010 is expected to be in the range of 950 000 tons to 1.0 million tons and a net import amount of 250 000 tons will still be needed. Along with the factor that Jiangsu Nantong Shenhua Chemical Co., Ltd. and Bridgestone (Huizhou) Synthetic Rubber Co., Ltd. will likely export, the actual import amount in China should be around 300 000 tons, equivalent to the import amount in 2009.
   The price of natural rubber will still be kept at a relatively high level in 2010. The sustained drought in Yunnan province, the second biggest natural rubber planting