China’s synthetic rubber is promising in 2023
Click:12    DateTime:Apr.24,2023

By Sun Guangqing, Sinopec Qilu Petrochemical Co., Ltd.

Butadiene, the primary material for China’s synthetic rubber, whose expanding capacity results in overcapacity and price fluctuation in a down market, but synthetic rubber’s low cost gains the upper hand in 2023. Styrene-butadiene rubber and butadiene rubber have stable supply even in the absence of new capacity plan, and major tire industry in downstream is expected to be better as demand rises. And the operation of China's synthetic rubber in 2023 is worth the wait.

Butadiene has increasing capacity and sufficient supply

The overcapacity was intensified in 2022 as China's butadiene capacity continued to rise, reaching 6 050 000 t/a by the end of year with an increase of 11%. China’s new butadiene capacity was 680 000 t/a, and capacity eliminated totalled 80 000 t/a in the same year (See Table 1). Domestic butadiene self-sufficiency further improved, with imports dropping and exports increasing. Till the end of 2022, supply exceeded demand by around 2 080 000 tons, up 42.47% from the previous year. 

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 Source: Oilchem

China’s butadiene capacity is projected to be 6 500 000 t/a in 2023, with a slowdown growth and existing overcapacity. Moreover, the capacity will rise by 390 000 t/a (See Table 2).

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 Source: Oilchem

China’s butadiene supply is expected to be 6 560 000 tons in 2023, mounting 14.69% or 840 000 tons (See Table 3). The closing stock will be around 2 510 000 tons, keeping rising from last year, and overcapacity will still be available.

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 Source: Oilchem

In 2023, butadiene price is expected to vary in a poor market. New capacity in South and East China went into production in the first quarter of 2023, leaving supply under more stress, which showed a weak market. In May, June and the fourth quarter, there will be a planning for increasing capacity of styrene-butadiene-styrene (SBS) and ABS, and by the time the price of butadiene will rebound. At the same time, concentrated new capacity for SBS and ABS might cause uncertainties in production expansion. And the price of butadiene is also difficult to stay high as it fluctuates in sluggish market. 

Stable capacity and sound fundamentals of synthetic rubber

1. Styrene-butadiene rubber

In 2022, China’s styrene-butadiene rubber industry increased capacity by 120 000 t/a through solution polymerization process. In January, there was a capacity of 60 000 t/a put into production in Xinjiang Dushanzi Petrochemical Co., Ltd., 60 000 t/a for Zhejiang Chemical Co., Ltd. in December. As of the end of year, the capacity reached 1 830 000 t/a, (390 000 t/a by solution polymerization process accounts for 21% totally) with a small rise of 7.02%. The supply in 2022 was around 1 690 000 tons, including outputs of 1 230 000 tons with an increase of 1.81%. And capacity utilization was about 67%, a decrease of 3 percentage points from one year ago. Moreover, the consumption was 1 420 000 tons, with a closing stock of 270 000 tons, showing overcapacity signs.

In 2023, to conduct maintenance, one of styrene-butadiene rubber enterprises with stable supply doesn’t plan to increase capacity. And styrene-butadiene rubber is expected to supply 1 730 000 tons in 2023, increasing 2.37% by 40 000 tons (See Table 4). The output is 1 280 000 tons, with a beginning stock of 270 000 tons and a net import of 180 000 tons. Moreover, the consumption is 1 440 000 tons, holding a closing stock of 290 000 tons. Above all, the supply side is under great pressure.

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 Source: Oilchem

2. Butadiene rubber

China’s butadiene rubber capacity increased by 330 000 t/a, or 19.21% in 2022 (See Table 5), all of which was high cis-products. Many new units were put into production in the fourth quarter but had a limited output. By the end of the year, the capacity arrived at 1 860 000 t/a (high cis-products 1 742 000 t/a account for 94% totally). The supply in 2022 was 1 210 000 tons, with output mounting 11.22% to 1 150 000 tons. And capacity utilization was not high (more than 60%), shrinking 1 percentage point from a year earlier. The consumption was 1 180 000 tons, with a closing stock of 30 000 tons, indicating supply and demand are in a balance.

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 Source: Oilchem

Without additional capacity, China’s butadiene rubber is sufficient in 2023. In addition, the supply of butadiene rubber will be 1 295 000 tons, gaining 7.02% year-on-year (See Table 6).

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 Source: Oilchem

A bright look for synthetic rubber in 2023

An organization carried out a study on China’s styrene-butadiene rubber and butadiene rubber in 2023, comprising 51 samples from 8 production enterprises and 43 trading companies (See Picture 1). 9.80% of the participants were bullish, which was mainly because of continuous improvement of disease control and prevention, gradual public health regulation, market recovery, favorable national policy for releasing good news and increasing demand.  And due to the dollar appreciation, rising commodities prices, sluggish economy and growing uncertainties, 23.53% of participants were pessimistic. And people who voted for a stable market accounted for 66.67%, primarily because the new butadiene rubber capacity will come on stream in 2023 regarding supply and demand, contributing to an increase in synthetic rubber supply.

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      Figure 1 Workers mindset study of China’s styrene-butadiene rubber and                   butadiene rubber

Butadiene is expected to have adequate supply in 2023 despite price fluctuation in a sluggish market. But it owns high production earnings from which the downstream market can benefit more, bringing a competitive cost to synthetic rubber. As for supply, both styrene-butadiene rubber and butadiene rubber don’t have additional capacity plan for 2023. Capacity utilization has a slight rise at current lower level, with limited production growth. Regarding demand, effective disease prevention makes logistics become flowing and people eager to go outside, backing up overall improvement of demand.

Overall, the butadiene industry’s profits were satisfactory in 2022, with butadiene rubber being relatively high, followed by styrene-butadiene rubber, which had lower profitability (See Table 7). Based on the market stability predictions by a certain institution’s research, the product price was supposed to vary slightly, with promising profits of synthetic rubber. The profits of synthetic rubber could rise because the downstream would get benefits from the raw material, butadiene.  

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                 Source: Oilchem