By Wang Yuying, Research Institute of PetroChina Jilin Petrochemical Company

Production

China started researching polyisoprene rubber (IR) in 1960s, but due to reasons like sources of raw materials and technologies, domestic industrial production of IR was not realized until 2010, when a 15 000 t/a rare-earth catalyzed IR unit of Guangdong Luhua New Material Co., Ltd. was put into production.

Benefiting from IR units kicked off after 2010 by firms including Yikesi New Material Co., Ltd., Sinopec Yanshan Petrochemical Company, etc., domestic IR capacity once reached 290 000 t/a in 2017, but dropped to 175 000 t/a in 2022, given that factors – e.g. transformation, upgrading, security and environmental protection  – led to:1) unit shutdown in 2018, i.e. a 5 000 t/a unit of Linshi CHEM (Puyang) Advanced Material Co., Ltd. and a 30 000 t/a unit of Qingdao Tpi New Material Co., Ltd.; 2) switch to other products in 2020, i.e. a 30 000 t/a unit of Ningbo Jinhai Chenguang Chemical Corporation and a 50 000 t/a unit of Luhua Hongjin Chemical (Zibo) Co., Ltd.– two units both switching to SIS and other products. Table 1 shows China’s IR producers in 2022.

Domestic rates of IR capacity utilization have been low in recent years. From 2020 to 2022, only three IR units from Guangdong Luhua New Material Co., Ltd., Fushun Yikesi New Material Co., Ltd. and Xinjiang Tianli Petrochemical Co., Ltd. have kept stable production, boasting a combined capacity of 85 000 t/a. The other three producers have suspended IR production for a long time, mainly because of product quality and stability, relatively low profit, pressure from security and environmental protection, sufficient supply of natural gas, etc. (See Table 1). It is forecast that there will be no new IR projects in the next few years. Figure 1 shows changes of China’s IR capacity and output from 2018 to 2022.

Figure 1 Changes of China’s IR capacity and output from 2018 to 2022

Import and export

Exceeding 30 000 tons from 2018 to 2022, IR import volume grew 30.3% YoY to 48 200 tons in 2022, the highest in the five years, according to customs statistics. Export volume increased year by year during 2018-2022, hitting a new five-year high of 15 600 tons in 2022, skyrocketing 239.1% YoY. See Table 2 and Figure 2 for more details.

Figure 2 Trend of China’s IR import and export from 2018 to 2022

The number of IR import sources is limited, while that of export destinations – mainly Asian countries – is numerous. Around 97.7% of imported IR came from Russia (38 500 tons) and Japan (8 600 tons) in 2022, when 4 100 tons of IR were exported to Vietnam, 3 300 tons to Malaysia and 2 400 tons to India – three countries accounting for a combined 62.8% of export volume.

In the first five months of 2023, import volume soared 44.2% YoY and was mainly from Russia. Annual import volume is forecast to remain high, mainly spurred by China’s rebounding demand. As for export volume 2023, it will exceed 10 000 tons, a relatively low level.

Consumption

From 2018 to 2022, domestic apparent consumption of IR has fluctuated around 80 000 tons, reaching 77 900 tons in 2018, a new five-year high of 85 700 tons in 2020 and 74 300 tons (up 7.68% YoY) in 2022. See Table 3 for more details. Degree of self-sufficiency was 58.6% in 2018, fell to 47.7% in 2020 but rebounded to 56.1% in 2022, showing that a relatively large part of domestic demand was satisfied by imported products.

In 2022, 55% of IR was consumed by tire industry, 20% by medicine industry, 15% by shoe material industry and 10% by other industries (e.g. conveyer belts, rubber tubes, adhesives, wires and cables). In spite of decreasing consumption proportion, tire industry will still be the largest IR consumer. However, new demand for IR will be mainly stimulated by medicine industry.

Price

Domestic IR prices are closely related to supply, demand, prices of raw material isoprene, prices of substitute natural rubber and prices of imported IR. Figure 3 shows China’s IR price trend from 2018 to 2022.In the five years, the highest IR price was RMB16 400/t in May 2022, and the lowest was RMB11 000/t in September 2020, up 17.14% and down 21.43%, respectively, from initial price of RMB14 000/t in January 2018.

Figure 3 China’s IR price trend from 2018 to 2022

Impacted by low prices of IR imported from Russia, domestic IR prices have declined since June 2022 to RMB12 900/t at the end of 2022, and decreased further to RMB12 300/t in June 2023. Meanwhile, natural rubber prices failed to be a strong support. Figure 4 shows price trends of IR and natural rubber in H1 2023. It is forecast that IR oversupply will remain, and IR prices may hardly see a big rebound, both in 2023.

Figure 4 Domestic price trends of IR and natural rubber in H1 2023

Suggestion

Domestic IR producers currently face many problems (e.g. low operating rates, relative weak demand growth, product homogeneity, weak competitiveness, etc.). Hence, they should be cautious to expand capacity, reduce production costs, improve operating rates and product quality, and research high-end products. Further, IR firms should develop new applications of IR to replace natural rubber, as the two kinds of rubber have similar properties. While meeting domestic demand, IR producers are wise to stimulate export trade to improve profit.