By Zhu Zhiwei, OilChem China

In 2019, China’s tire market prices showed a downward trend, so did its raw materials, except for natural rubber, which went up slightly after a long period of consolidation.

Natural rubber: supply will be ample, and demand might recover

   The globally oversupplied problem of natural rubber was not relieved in 2019. On the whole, RUI of Shanghai Futures Exchange showed a volatile situation in 2019, but the price center has moved upward compared to 2018.

   It is expected that in 2020, the market, with ample supply, will see a small rally in the demand, and the support from cost will be strong. Natural rubber futures prices are expected to fluctuate from RMB10 000 to 13 000 / t to RMB11 000 to 14 000 / t in 2020.

Butadiene: unbalanced supply-demand

   In 2019, Inner Mongolia Jiutai and Nanjing Chengzhi both launched their new butadiene lines, adding a total capacity of 170 kt/a to the market. The supply increased more quickly than the demand. The market prices were lower than in 2018, and the mainstream price range was RMB8 500 to 9 500 / t.

   It is estimated that in 2020 China’s butadiene industry will have another 910 kt/a new capacities, while the styrene-butadiene rubber and butadiene rubber industries will not have any expansion coming. The supply and demand will be unbalanced. The overall price range of butadiene market will be at lows in 2020, and the impact of unexpected news on the market is not expected to be strong.

Styrene butadiene rubber: prices are not likely to increase significantly

   In 2019, China did not have any new styrene-butadiene rubber capacity coming on stream, leaving the total capacity at 1.79 million t/a, of which the actual ESBR capacity was 1.14 million t/a. In the first half of the year, the prices of styrene-butadiene dry rubber and styrene-butadiene oil rubber hit the lowest point since the beginning of 2017. However, the operating rates of domestic styrene-butadiene rubber plants has maintained a year-on-year growth, and the supply was abundant. In the second half of the year, the prices of raw materials went up, and styrene-butadiene rubber manufacturers were in a state of loss.

   It is expected that in 2020, the butadiene rubber industry will have no capacity expansion. And styrene-butadiene rubber industry will see a new line launched with capacity at 40 kt/a, by Zhenjiang Chimei Chemical Co., Ltd. (Phase II). It would be unwise to expect a big rise in prices as the supply is abundant and the styrene-butadiene rubber units will be operating at high loads. Under the pressure of environmental protection and supply-side reform, industries such as tires and rubber tube belts are still in the structural optimization stage, and it is expected that the possibility of a significant increase in demand is small. Against the background of oversupply and unfavorable economic environment, the styrene-butadiene rubber market will not rise in a wide range, but it is still necessary to pay attention to the influences of the sales companies’ policies and the global economic environment.

Butadiene rubber: prices violating at lows

   In 2019, the capacity of China's butadiene rubber has not changed, the capacity utilization rate has increased slightly, so did the output and consumption. The prices of butadiene rubber fluctuated more frequently than in previous years, and the fluctuation band continued to narrow.

   In 2020, the domestic butadiene rubber industry will not have additional capacities.  With ample raw materials, and possible price declines, the industry operating rate is expected to increase. It is anticipated that production will continue to increase. Due to the improvement of China’s butadiene rubber quality and price advantage, the import volume is likely to shrink slightly, and the total supply in 2020 will continue to show an increasing trend. In view of the possible increase in tire output and export volume and the development of pipe belts and plastic modification industries, the increase in China's butadiene rubber consumption in 2020 would be limited. It is expected that the butadiene rubber market may perform weakly in 2020.

Butyl rubber: domestic competition may be more fierce

   In 2019, China’s butyl rubber market prices have plunged. Although the new lines of Panjin Heyun, Ningbo Formosa Plastics and Yanshan Petrochemical were still shut, the increase in the import volume of ordinary butyl rubber and the continued downturn in downstream demand have dampened the market for a long time. In 2018, the import volume of halogenated butyl rubber decreased significantly, and domestic halogenated butyl rubber manufacturers ushered in development opportunities. Zhejiang Xinhui and Jingbo Zhongju’s units maintained high utilization, and they both have expansion plans. China's butyl rubber exports have grown significantly.

   At present, domestic butyl rubber manufacturers are mostly focusing on halogenated butyl rubber, which brings large profits and is in large demand. The ordinary butyl rubber market is occupied by cost-effective imported cargos. The competition between imported butyl rubbers and domestic goods is fierce. In 2020, the Panjin unit is expected to be re-started in the second half of the year, and Indian shipments will gradually enter the market, leaving the domestic competition more intense. The price of crude oil remains high, kind of supporting the domestic market. It is expected that China's butyl rubber market price will show a narrow downward trend in 2020.

Carbon black: still quick in decrease and slow in increase

   The carbon black market prices fell in 2019. The price of raw materials was high, but the price of carbon black was dragged down by weak downstream demand. The large manufacturers were mainly affected by the decrease in downstream demand, and the operating rates decreased. The small manufacturers shut down units frequently due to environmental protection and cost pressure. The carbon black market suffered serious losses.

   From the perspective of supply and demand, the trend of oversupply will be difficult to change in 2020. The carbon black market prices are still volatile and difficult to rise. It is estimated that the price fluctuation range of N660 will be at RMB4 900 to 5 700 / t.

Additives: the market will be weak

   The mainstream prices of the rubber additive market dropped in 2019. During the year, the accelerator kept doing down, and the antioxidant also turned to a downward trend after a brief upward in March and April.

   The decline in accelerator prices was mainly due to the weak performance of downstream tire and other products. While the supply was still sufficient, forcing the prices fall sharply year-on-year.

   Antioxidant prices rose significantly in March and April, mainly because the tire and other downstream sectors were in peak season, their operating rates were relatively high, and the demand for raw materials was strong. However, when it came to June to August, these downstream industries entered their traditional off-season, while the antioxidant supply was still abundant. The market quickly turned down.

   It is estimated that the price fluctuation range of the mainstream accelerator brand CZ in 2020 will be RMB17 000 to 19 500 / t; and the price fluctuation range of the mainstream antioxidant brand 4020 will be RMB16 000 to 19 000 / t. The prices of rubber additives are mainly affected by the supply-demand. From March to May is the downstream high season, it is possible that rubber additives prices will rise. From June to August, due to the high temperature, is the traditional off-season of the downstream sectors, and the market is likely to go down. Then in September and October, the market might stop falling and rebound. In November and December, the demand will be greatly affected by the policies. If there is no obvious support from raw materials, the rubber additives would be fluctuating at a low level.

   Judging from the current economic environment and supply and demand pattern, the main raw materials of tires will not have a clear rebound in 2020. Most products may continue to fluctuate at a low level or even decline slightly, giving very limited support to tire prices. On the demand side, the export will still face huge challenge. Although the export volume of tires in 2019 continued to increase, it was largely because of the price reduction. Domestic market will see many uncertainties, and the slowdown of economic growth has imposed certain restrictions on the growth of tire demand. China’s tire industry reshuffle will continue, so will the “price war” in the domestic tire market in 2020.