Polybutadiene Rubber Makers Must Expand International Sales

By Tan Jie, Sinopec Maoming Petrochemical Co., Ltd. Research Institute

Supply pattern changes

Capacity growth has slowed greatly and the strategic reduction of capacity has started to show. R&D for polybutadiene rubber (PBR) in China started in the 1960s. The period from 2012 to 2014 had the most rapid capacity growth. New capacity during that period amounted to 790 kt/a. No new units were put on stream in 2015 as capacity growth started to slow down. While a new unit was completed in 2016, another unit shut down, and one unit was switched over to other product lines, capacity was reduced by 140 kt/a. By June 2017, China had 1 575 kt/a of PBR capacity.
Major investors are diversified. In the past, most PBR units in China were owned by Sinopec and PetroChina. In recent years, however, due to investment of foreign and private capital, Sinopec and PetroChina coexist with private and joint venture enterprises. By June 2017, their capacity holdings were respectively 588 kt/a (including Sinopec’s JVs), 425 kt/a and 562 kt/a, or 37.33%, 26.98% and 35.69% of the national total.
The number of product varieties increases constantly. In addition to traditional nickel series PBR, Sinopec Gaoqiao Petrochemical Co., Ltd. and PetroChina Dushanzi Petrochemical Co., Ltd. have introduced technologies from abroad to produce lithium series low-cis PBR; TSRC-UBE (Nantong) Chemical Industries Co., Ltd. produces cobalt series PBR; and Shandong Zibo Qixiang Tengda Chemical Co., Ltd. and PetroChina Dushanzi Petrochemical Co., Ltd. both produce rare earth series PBR.
The proportion of domestic technologies is growing. Low-cis PBR units of Sinopec Gaoqiao Petrochemical Co., Ltd. and PetroChina Dushanzi Petrochemical Co., Ltd. use patented technologies from Asahi-Kasei of Japan and Polimeri Europa (formerly EniChem) of Italy. The cobalt series PBR unit in TSRC-UBE (Nantong) Chemical Industries Co., Ltd. uses technology from UBE of Japan. All other PBR enterprises use technologies developed in China.
Geographic distribution of capacity has changed considerably. Two PBR units in East China have been decommissioned, PBR capacity in East China (including Shandong, Jiangsu, Shanghai and Zhejiang) has declined from 880 kt/a in 2015 to 740 kt/a in 2017, and now accounts for around 46.98% of the national total. South China (including Guangdong and Fujian), Northeast China (including Heilongjiang and Liaoning), Northwest China (Xinjiang), Southwest China (Sichuan), Central China (Hunan) and North China (Beijing) respectively host 150 kt/a, 210 kt/a, 115 kt/a, 150 kt/a, 60 kt/a and 150 kt/a. Shandong is the biggest PBR producer, with 410 kt/a capacity, or 26.03% of the national total. Jiangsu is second, with 172 kt/a, or 10.92%.
Operating rates keep sliding. With declining demand and higher raw material costs, operating rates of PBR unit have declined constantly. The average operating rate in 2011 was around 65.9%, in 2013 it fell to 55.5% and in 2015 it dropped further to 46.6%. As a result of strategic capacity reduction, the average picked up to 53.0% in 2016.
China imported 223.6 kt of PBR in 2016, a YoY drop of around 3.2%, according to customs statistics, while 23.9 kt was exported, an increase of around 7.17%.

Production of green tires promotes constant demand increase

China uses PBR mainly in making tires, shoes, and rubber hoses/belts, and modifying HIPS/ABS. Automobile tire producers were collectively the main consumers in 2016, accounting for around 70.0% of the total. HIPS/ABS modification came next, accounting for around 10.9%, while 9.1% was used in shoemaking and 6.9% in making rubber hoses/belts.
Output of high-performance tires and green tires is growing, so demand for PBR, especially high-performance PBR will increase constantly. Owing to the rapid development of the electronic/electric sector, consumption of HIPS and ABS will increase rapidly, and demand for PBR will rise further. It is expected that the demand for PBR in China will reach 1 150-1 200 kt in 2021.
Apparent consumption of PBR in 2016 was 1 039.7 kt, a YoY increase of around 2.06%. Average annual growth of apparent consumption during 2011-2016 was around 3.05%.

Market competition becomes fiercer

Growth of capacity has slowed down and strategic capacity reduction has started. Nevertheless, quite a few PBR enterprises still plan to construct new units or expand existing units during 2017-2021. If these projects are executed on schedule, China’s PBT capacity is expected to reach 2 150 kt/a in 2021. Oversupply will worsen, utilization of production units will decline further and market competition will grow fiercer. While satisfying domestic demand, PBR enterprises should actively expand in the international market to mitigate oversupply in China.
The trend toward lighter automobiles and tires that are green, energy-saving and high-performance will influence the pattern of China’s PBR supply. Traditional nickel series PBR can hardly meet the requirements of green tire makers. Rare earth series PBR reduces tire hysteresis loss, heat generation and rolling resistance, improves abrasion resistance and wet skid resistance while optimizing tire aging. Rare earth series PBR products are therefore preferred in developing high-performance tires and energy-saving tires. The consumption of traditional nickel series PBR will decline constantly in the future, whereas demand for high-performance PBR varieties such as rare earth series PBR will keep growing.