Polybutadiene Rubber: A New Round of Capacity Expansion
Click:0    DateTime:Jun.24,2022

Wang Yuying, Jilin PC Research Institute

China’s polybutadiene rubber production dropped in 2021, while profits hit a 10-year high. The next few years will see a new round of capacity expansion, and producers need to enhance their competitiveness by reducing costs and developing new products and applications.

Output down, profit up

Without any expansion, China had 19 polybutadiene rubber producers in 2021 (21 production lines), with total capacity of 1.502 million t/a. Table 1 has details. 

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China’s polybutadiene rubber capacity distribution by companies: Sinopec and PetroChina (530 000 t/a and 370 000 t/a respectively) take 35.3% and 24.6%; private and JVs (602 000 t/a altogether) take 40.1%.

Distribution by regions: East China takes over half of the total due to the expansions in Shandong from 2011 to 2013. Chart 1 shows details of such distribution in 2021.

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Chart 1 China’s polybutadiene rubber capacity distribution in 2021

China’s polybutadiene rubber capacities in the past ten years are shown in Chart 2. From 2012 to 2014, the capacity expansion was rapid, and the national total once reached 1.702 million t/a in 2014. Such concentrated capacity launching led to oversupply, severe competition, and overall loss. Some units with high raw materials cost or operation cost were forced to shut down. 

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Chart 2 China’s polybutadiene rubber capacities, 2012-2021

China’s polybutadiene rubber capacity reduced in 2016 as Shengyu Chemical (former Huayu Rubber) transformed its 80 000 t/a rare earth catalyzed unit to SBS production, and Gaoqiao PC shut down permanently its 120 000 t/a line. By the end of 2017, the total capacity dropped to 1.502 million t/a. The growth during 2017 to 2021 was stagnant. 

The following years will see another round of expansion. There will be three new polybutadiene lines launched in 2022, as shown in Table 2. The total capacity will reach 1.692 million t/a at the end of 2022 if these expansions are implemented as planned. 

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China’s polybutadiene rubber output in 2021 was 947.5 thousand tons, down by 16% from 2020, with average operating rate at 64.8%. Tow major fire incidents were the major reason of the production curtailment. 

The industrial profit, however, hit a 10-year high in 2021 (see Chart 3). It was mainly because of the ample supply of butadiene and the larger price gap between butadiene and polybutadiene rubber. Some idle polybutadiene rubber lines were restarted under such circumstance. For instance, Zhenhua PC and Shandong Shengyu resumed their 100 000 t/a line and 40 000 t/a line in the second half of 2021.

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Chart 3 China’s polybutadiene rubber industry profits, 2012-2021

As the supply of butadiene is abundant, the profits of polybutadiene rubber are likely to be further improved. The producers have been more eager to run their units and the output in 2022 is expected to go up. 

Demand from tires weakens and market competition becomes fiercer

China’s polybutadiene rubber apparent consumption was 1.0444 million tons in 2021, down by 22% from 2020. Domestic products took 90.7% of the total, a 5-year high. The supply-demand of polybutadiene rubbers in China from 2017 to 2021 is shown in Table 3.

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Polybutadiene rubbers are mainly applied to tires, plastics modifications, and shoes in China. Tires, as the biggest consumer, take 70% of the market. Polybutadiene rubber can be used as modifier of PS and ABS, and such consumption takes 11% of the total. As the capacities of PS and ABS are expanding, their consumption of polybutadiene rubbers is growing accordingly. In the sector of shoes, the demand for polybutadiene is decreasing due to the substitutes like TPR and EVA. Industrial products such as transportation belts, v-belts, and hoses also have a certain amount of consumption of polybutadiene rubbers. Chart 4 indicates China’s polybutadiene rubber consumption structure in 2021.

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Chart 4 China’s polybutadiene rubber consumption structure, 2021

The market supply of natural rubber was ample in 2021, and downstream industries were more willing to choose natural rubber over polybutadiene due to the price gap between the two, leaving the demand for polybutadiene rubber weak. As the tire production cost remained high in 2022, its demand for polybutadiene rubber is not likely to push up. Given the growth anticipation of capacity and production, and bearish market demand, polybutadiene rubber market competition will be fiercer in 2022. 

Import decreases while export increases

1. Import 

China’s polybutadiene imports kept going down from 2017 to 2021 on the back of improved domestic product quality and import prices. After Covid-19 hit, the import cargos’ prices fell and China’s import volume hiked in the second half of 2020, reaching 284.5 thousand tons in the whole year. However, in 2021, along with overseas polybutadiene rubber market resumption and domestic products’ price advantage, China’s polybutadiene rubber import amount dropped to 187.9 thousand tons, down by 34% YoY. Chart 5 shows China’s polybutadiene rubber import and export from 2017 to 2021. 

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Chart 5 China’s polybutadiene rubber imports and exports, 2017-2021

China’s top seven polybutadiene rubber import origins were Korea, Japan, Singapore, China's Taiwan, UAE, Thailand and Russia in 2021, according to Customs statistics. Korea ranked No. 1, but its proportion dropped by 44% YoY, and meanwhile, Singapore and Russia respectively fell by 49% and 71%. The import volume from Korea is expected to revive in 2022, after the feedstock cost pressure in Korea relieved. The import origin data in 2021 are shown in Chart 6.

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Chart 6 China’s polybutadiene rubber import origins, 2021

Despite of the development of polybutadiene rubber variety, rare earth catalyzed polybutadiene rubber and LCBR are still in demand in China. Coupled with factors like import arbitrage and tariff write-off, China still has import demand, with the volume going down though.

2. Export 

China’s polybutadiene rubber export volume was going up from 2017 to 2021, with the number in 2021 reaching 91 thousand tons, up by 26% YoY.

The biggest export markets in 2021 were Thailand, Viet Nam, Korea, Indonesia and Hong Kong of China, no big change over the past years. 

Enhance the competitiveness from five angles

In summary, China’s polybutadiene rubber market prices increased in 2021 at heels of ample butadiene supply and the industry profit hit a 10-year high. Many idle units were put back into production under such circumstances. There will also be three new lines launched in 2022. So the capacity and production are both expected to increase. However the downstream demand and export market are not optimistic, and competition will be fiercer. To enhance the competitiveness, the producers should:

1. Decrease production cost by implementing refined operation, optimizing production process, and improving employees’ efficiency.

2. Speed up the development of new products. With the market's increasing demand for diversified and high-end products, new product development has become a new method to improve the production efficiency. Polybutadiene rubber manufacturers should follow the market, continuously develop new brand products, and improve product competitiveness, so as to avoid falling into the homogeneous competition.

3. Strengthen the research and development of new applications by developing market in non-tire products and increasing the consumption of polybutadiene rubber in engineering tire, tractor tires and agricultural machine tires. 

4. Further develop international markets to ease domestic oversupply problem and guarantee the healthy and quick development of the industry. 

     5. End low-end repetitive construction. Due to the oversupply, operating rates are low. As backward capacities will be washed out along with the supply-side reform, it should be cautious to build new or expanded capacities so as to avoid vicious competition.