Analysis of China’s Neoprene Market

By Li Yufang and Wu Xiaoming, Beijing Jiangning Chemical Research Institute

1. Domestic Production

By the end of 2011, China’s neoprene capacity had reached 83 000 t/a (19.44% of the world’s) – Changshou Chemical Co., Ltd (CC), 28 000 t/a; Shanxi Synthetic Rubber Group Co., Ltd (SSRG), 25 000 t/a in Datong city, 30 000 t/a in Gaoyang county. And through new projects, CC and SSRG will increase their capacity by 40 000 t/a and 80 000 t/a respectively. Other areas/enterprises planning to construct new neoprene units include Changning county of Sichuan province (unit design capacity, 50 000 t/a), Dongying Port Economic Development Zone (unit design capacity, 50 000 t/a), Inner Mongolia Lantai Industrial Co., Ltd (unit design capacity, 20 000 t/a), etc., pushing the domestic neoprene capacity to exceed 200 000 t/a in 2015. The country’s neoprene output was 42 000 tons in 2005, growing to 45 000 tons in 2008, and achieved 7.84% YOY growth (44 000 tons) in 2011, when the overall operating rate was 53.0%.

2. Import and Export

1) Import
China imported 25 600 tons of neoprene in 2005, decreasing to 23 500 tons and 19 000 tons in 2007 and 2009 respectively, rebounding to 20 400 tons in 2011, down 17.41% YOY. 82.35% of the imports in 2011, or 16 800 tons, are primary-form neoprene; the remaining 17.65% (3 600 tons) is neoprene plate, sheet and belt.
   As three major importers to Mainland China, Taiwan, Japan and Germany contributed 20 269.66 tons (99.14%) of neoprene to the imports in 2011, decreasing 17.27% YOY. 91.67% and 6.55% of imported primary-form neoprene were from Japan and Germany, which also provided 88.89% and 5.55% of imported neoprene plate, sheet and belt.
Neoprene import demand is mainly distributed in Guangdong, Shanghai, Jiangsu and Zhejiang, which together imported 17 262.01 tons (84.43% of the total) in 2011, down 21.19% YOY.

2) Export
China exported 1 000 tons of neoprene in 2005, rising to 9 500 tons in 2007, dropping 62.50% YOY to 2 700 tons in 2009, soaring 90.49% YOY to 8 000 tons in 2011 – primary-form neoprene, 7 900 tons (98.75%); neoprene plate & sheet & belt, 100 tons (1.25%).
   China’s neoprene is mainly exported to Turkey, Italy, Brazil, America and Russian Federation, with the export volume to the five countries/regions reaching 3 133.86 tons (38.98% of the total exports) in 2011, jumping 170.68% YOY; primary-form neoprene, Turkey (9.22% of the exported primary-form neoprene) and Italy (8.66%); neoprene plate & sheet & belt, Russian Federation (38.37%) and Korea (10.49%).
Most exported products are from Shanxi, Chongqing, Hebei and Guangdong, which together contributed 94.11% (7 565.23 tons) to the exports in 2011, soaring 90.10% YOY.

3) Supply and Demand Relation
Domestic neoprene consumption has shown little change in recent years, with an annual decrease rate of 3.19% from 2006 to 2011.

4) Consumption Structure and Distribution
Adhesives used in the fields of shoemaking and building consume 60% of neoprene in China; industrial rubber products, 30%; electrical wire and other areas, 10%. From a regional perspective, South China and East China consume most neoprene, accounting for 65% of the total; North China and Central China, 25%; other regions, 10%. Due to economic recession worldwide, slowing growth of relevant industries in China, substitutes such as EPDM, the nation’s demand for neoprene can hardly grow rapidly, with domestic consumption likely to hit 70 000-75 000 tons in 2015.

Table 1 Supply and Demand of China’s Neoprene  (kt, %)
Year    Output    Imports    Exports    Apparent Consumption    Self-sufficiency Rate
2005    42    26.6    1    67.6    62.13
2006    48.3    24.3    6.6    66    73.18
2007    52    23.5    9.5    66    78.79
2008    45    23.3    7.2    61.1    73.65
2009    39.8    19    2.7    56.1    70.94
2010    40.8    24.7    4.2    61.3    66.56
2011    44    20.4    8    56.4    78.01

3. Prospect

As for production technologies, the acetylene method and the butadiene method, each having its own character, will co-exist for a long time, but the later is the development trend. Technical progress lies in the improvement of the polymerization monomer process, and new product R&D.
   Because of substitutes, the development of the neoprene industry at home and abroad will decelerate or stop. However, the substitutes can just replace some functions, not all. For example, ethylene propylene rubber has aging resistance similar to that of neoprene but cannot be used as an adhesive. Therefore, neoprene still has market demand.
   After many years’ development, China’s neoprene capacity has reached 83 000 t/a. As new or expanded capacity will be constructed, making the capacity excessive and leading to more intense competition, enterprises are advised to be more carefully on issues of constructing new units. With regard to technologies, the industry – besides improving the acetylene method – should also develop the butadiene method to promote the domestic technical level overall.
   The domestic calcium carbide acetylene method, uncompetitive in the international market, lags far behind Denka’s in material consumption, energy consumption, production safety, environment pollution, product quality, etc. The calcium carbide consumption of the former is 33% higher than that of the later. To improve the competitiveness, China’s neoprene enterprises are advised to:
* invest more in technology, learn from foreign techniques, reduce consumption in material and energy, lower costs, improve the acetylene utilization rate, stabilize Mooney viscosity of existing products;
* develop new products, pay attention to R&D of functional latex like carboxylated latex and copolymerization latex;
* realize the industrialization of high-Mooney non-sulfur regulation-WHV, increase positive-12-mercaptan regulated products, and raise the preparation efficiency of 2, 3-dichloro-1 and 3-butadiene second monomer;
* boost the development of recovery techniques regarding 1, 3-dichloro-2-butene by-products to reduce production costs
   Different from foreign goods, China’s neoprene has limited specification, and mainly are mid-market and low-end products. Therefore, domestic neoprene still has a long way to go to meet the level of foreign cold-resistant, heat-resistant, copolymer adhesive, easy-processing (including pre-crosslinked gel) and latex-diversification products. As most domestic demand for high-end products relies on imports, the country should develop high-grade products more actively.