Synthetic Rubber Industry to See No More High Profits


By Zhou Wenrong, China Rubber Industry Association

In 2014, the capacity to make synthetic rubbers in China’s major synthetic rubber units increased constantly, output and consumption dropped slightly, the average operating rate of units was reduced to 56%, and the total import volume and export volume decreased slightly. The output of raw material butadiene climbed considerably, the import volume reduced drastically, and the domestic price of butadiene continued to decrease. The market prices of synthetic rubber products further reduced to the lowest level in decades.

1. Capacity

In 2014, five new synthetic rubber units were put into operation in China, and the newly added capacity to make synthetic rubbers was 290 kt/a. As of the end of 2014, the capacity to make synthetic rubbers (excluding latex and special rubbers, the same below) in China’s major synthetic rubber units reached 5.18 million t/a, up 4% year-on-year.
The product varieties of new units included emulsion-polymerized styrene-butadiene rubber, ethylene-propylene rubber and isoprene rubber. Major new units included a 100 kt/a emulsion-polymerized styrene-butadiene rubber unit of Zhejiang Weitai Rubber Co., Ltd, a 75 kt/a EPDM (ethylene propylene diene monomer) rubber unit of Shanghai Sinopec Mitsui Elastomers Co., Ltd, a 40 kt/a EPDM rubber unit of PetroChina Jilin Petrochemical Co., Ltd, a 30 kt/a isoprene rubber unit of Ningbo Jinhai Deqi Chemical and Industry Co., Ltd and a 30 kt/a isoprene rubber unit of Xinjiang Dushanzi Tianli Industrial Corporation.

2. Output

In 2014, China’s output of major synthetic rubbers (excluding synthetic latex and special rubbers) was 2.944 million tons, down 1.1% year-on-year. After 15 consecutive years of growth following the Asian financial crisis of 1998, the domestic output of major synthetic rubbers decreased for the first time. Affected by the import of natural rubber, the output of both styrene-butadiene rubber and isoprene rubber dropped considerably. Especially influenced by the natural rubber with low price, isoprene rubber units were generally in a state of suspended production. In contrast, the output of halogenated butyl rubber, solution-polymerized styrene-butadiene rubber, ethylene-propylene rubber, high-end styrene thermoplastic rubber as well as high-end products for some special purposes still increased YOY, and the product portfolio improved.
In 2014, according to the classification of synthetic rubber enterprises, the output proportion was 42.5% for Sinopec Group (including joint venture enterprises), 26.9% for CNPC (including joint venture enterprises) and 30.7% for other enterprises.

3. Import and Export

In 2014, China’s import volume of synthetic rubbers was 1.485 million tons, down 43 thousand tons year-on-year, and the export volume was 196 thousand tons, a year-on-year decrease of 17 thousand tons. China’s net import volume of synthetic rubbers was 1.289 million tons in 2014, down 26 thousand tons year-on-year, of which the net import volume of major synthetic rubbers was 1.075 million tons, down 2.4% year-on-year. The import volume and export volume of styrene-butadiene rubber, polybutadiene rubber and isoprene rubber all decreased. The import volume of ethylene-propylene rubber and butyl rubber increased constantly and hit a new high. In 2014, the varieties with the import volume of over 200 thousand tons in turn included styrene-butadiene rubber, butyl rubber, ethylene-propylene rubber and polybutadiene rubber.
In 2014, China’s export volume of synthetic rubbers totaled 196 thousand tons, down 33% compared with the historical highest level in 2011. In 2014, the varieties with export volumes of over 10 thousand tons were styrene-butadiene rubber, polybutadiene rubber, styrene thermoplastic rubber and butyl rubber, ranked by volume.

4. Apparent consumption

In 2014, China’s apparent consumption of major synthetic rubber varieties was 4.019 million tons, down 1.4% year-on-year, of which the apparent consumption of seven basic synthetic rubber varieties was 3.264 million tons, a year-on-year decrease of around 60 thousand tons. The consumption of styrene-butadiene rubber and isoprene rubber that were greatly affected by the import of natural rubber with considerably lower prices decreased; however, the consumption of ethylene-propylene rubber and butyl rubber still increased.
In 2014, the market share of domestic major synthetic rubber varieties reached 73.3%, up 0.3 percentage points year-on-year. Among these, the domestic synthetic rubber varieties with a market share of over 80% included SBS (styrene-butadiene-styrene block copolymer), styrene-butadiene rubber and polybutadiene rubber, and the synthetic rubber varieties with a market share of more than 60% were chloroprene rubber and acrylonitrile-butadiene rubber. However, in 2014, the domestic market for halogenated butyl rubber and ethylene-propylene rubber was still dominated by foreign products.
The growth of synthetic rubber capacity greatly exceeded the growth of market demand, so the capacity to make synthetic rubber was seriously in surplus. The overall operating rate of major synthetic rubber units dropped constantly from 84% in 2008 to the lowest level in decades (56.8%) in 2014. The average operating rate of styrene-butadiene rubber units fell to 64%, and the average operating rates of butyl rubber units and isoprene rubber units were less than 55% and 10%, respectively.

5. Prices

In the international market, the growth of the natural rubber supply has been faster than the growth of consumption for many years, resulting in a growth of natural rubber inventories. Since early 2011, the domestic price of natural rubber has slid for four years, resulting in a long-term price decrease of domestic synthetic rubbers and further affecting the price trend of raw material butadiene. In 2014, the CIF price of imported synthetic rubbers continued to decrease, the average CIF price of imported synthetic rubbers dropped by 7%, and the average CIF price of some synthetic rubber varieties fell by more than 10%.
In 2014, the prices of domestic synthetic rubbers continued to decline, and the number of domestic synthetic rubber enterprises losing money increased further. The domestic price of natural rubber fell quite low, further affecting the operating rates of styrene-butadiene rubber units, polybutadiene rubber units and isoprene rubber units.
In 2014, two new ethylene units of Sinopec Wuhan Petrochemical Co., Ltd and PetroChina Sichuan Petrochemical Co., Ltd went into normal production, and the output of butadiene climbed while the ethylene output also increased.
In 2014, China’s output of butadiene reached 2.441 million tons, up 8% year-on-year. Due to the domestic output growth of butadiene and market downturn of synthetic rubbers, China’s purchase of raw material butadiene from the international market decreased drastically in 2014. China’s import volume of butadiene was 230 thousand tons, down 45% year-on-year, and the average annual import price dropped by 12%.
In 2014, China’s apparent consumption of butadiene reached 2.635 million tons, up 20 thousand tons year-on-year, of which the market share of domestic butadiene was 93%.
Influenced by the market downturn of rubbers and the drastic reduction of crude oil prices, China’s price of butadiene continued to decline drastically in 2014, and it hit the lowest level in ten years by the end of the year.

6. Projection in 2015

In 2015, a number of units (mainly including ethylene-propylene rubber units and butyl rubber units) will be completed and put into operation in China, and the domestic total capacity of synthetic rubber units will further expand.
In 2015, no new or expanded ethylene units using naphtha as raw material will be put into operation; however, with the price reduction of crude oil in the international market, the operating cost reduction of traditional ethylene units using naphtha as raw material will help to improve the operating rate of units and increase the output of ethylene. At the same time, the output and supply of domestic butadiene will increase, but the growth will be limited and will not change the situation of still needing to import butadiene.
The low price of natural rubber caused by the oversupply of natural rubber in the international market will continue to exert pressure on the price of synthetic rubber, and due to the unmatched raw material supply and the constant market downturn, the era for long-term high profit of synthetic rubber general-purpose products has ended.