Market Analysis of Cis-1,4-Polybutadiene Rubber
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With the gradual recovery of the world economy, the demand for cis-1,4-polybutadiene rubber (BR) in the world rebounded and the global operating rate of BR units also increased in 2010. The global capacity to make BR was 3.64 million t/a, and the output was 2.87 million tons and the operating rate being 79% in 2010. The consumption of BR in the world was 2.87 million tons, up 8.1% year-on-year.

1  Supply

During 2000-2010, China's capacity of BR grew slowly. Except expanding the existing BR units, there were no new BR units added during 2000-2005 in China. During 2006-2010, four new BR units came on stream in succession. By the end of 2010, the capacity of BR in China reached 663 000 t/a with an average annual growth of 5% during 2000-2010. With the increase of the demand for BR, the operating rate of BR units in China rose constantly, from 78.5% in 2000 to 97.9% in 2010, and the total output of BR climbed to 649 000 tons in 2010 from 310 000 tons in 2000.
   In 2011, another two BR units - 50 000 t/a BR unit of Fujian Fuxiang Chemical Co Ltd and 30 000 t/a BR unit of Shandong Wanda Chemical Co Ltd went on stream, and Sinopec Qilu Petrochemical Co Ltd expanded its capacity of BR to 65 000 t/a from 45 000 t/a. In addition, Shandong Huamao New Materials Co Ltd started up its 100 000 t/a BR unit in January 2012.
   Prior to 2011, China's automobile industry developed rapidly, the export of rubber products like tires increased quickly and the demand for BR in China therefore rose rapidly. China's consumption of BR reached around 880 000 tons in 2010 with an average annual growth of 10.2% since 2000, of which the growth reached 13.2% during 2005-2010.

2  Consumption

Because the supply growth is less than demand growth, the amount of BR imported to China rose rapidly. The import amount was 52 000 tons in 2000 and increased to 262 000 tons in 2010 with an average annual growth of 17.5%. The self-sufficiency rate of BR in China dropped from 94.6% in 2000 to 73.7% in 2010.
   China's imports of BR mainly come from neighboring countries and regions. The total amount of BR exported to China from Korea, Japan, Taiwan province, Russia and Thailand reached 203 000 tons in 2010, accounting for around 77.4% of total, up 3 percentage points compared to the 74.4% in 2000.
   China's consumption of BR was 880 000 tons in 2010. BR in China is mainly used in the production of tire and its products, shoemaking, plastic modification and cycle tire sector. Tire manufacturing industry is the biggest consumer of BR and China's consumption of BR in the sector of tire and its products was around 615 000 tons, accounting for around 70% of the total. Due to its excellent wear resistance and flexibility resistance, BR has irreplaceable use in the production of tire, including sidewall rubber, heavy duty bias tire, steering tire tread, winter tire tread and bead chafer of radial tire, etc. For example, 70% rubber for producing bead area of heavy duty radial tire is low cis-1,4-polybutadiene rubber. There are many tire producers in China, the production scale has expanded constantly, and the product portfolio has transformed from bias tire to radial tire and from using inner tubes to no inner tubes. The output of the high-performance tires and "green" tires has increased continually. The output of tires reached around 420 million pieces in 2010, of which the output of radial tires was 360 million pieces and the proportion of radial tires in the total tires reached 85.7%, up 53.6 percentage points compared to that in 2000.
   With the rapid development of electronic and electrical appliance sector, the consumption of HIPS (high impact polystyrene) and ABS (acrylonitrile-butadiene-styrene) resin in China has increased rapidly. As a plastic impact modifier, BR has been further applied. The addition of BR is around 5%-8% for producing HIPS, and around 10%-20% for the production of ABS. China's output of HIPS was around 880 000 tons in 2010. The consumption of BR in above plastic modification sector was estimated to be around 90 000 tons in 2010, accounting for 10.2% of the total. Most HIPS producers in China are foreign enterprises, mainly distributed in East China.
   BR is also widely used in shoemaking sector. China is a big country for making shoes and produces 1.3 billion-1.5 billion pairs of shoes annually, with over 70% for export. Major export destinations include the United States and the European Union (EU). China's shoemaking enterprises are mainly distributed in Guangdong, Fujian and Zhejiang provinces. With the change of the market and the constant rise of labor cost, part of capacity to make shoe in the southeast coastal regions has gradually shifted to the central and western regions such as Sichuan province, Chongqing municipality and Henan province. Sole material used rubbers include natural rubber, styrene-butadiene rubber and BR, etc. It has the advantage of agile formula, thus some producers could adjust the rubber proportion according to the price of raw materials to reduce the production cost. The consumption of BR in shoemaking sector was expected to be around 80 000 tons in 2010, accounting for 9.1% of the total.
The cycle tire is another consumption sector of BR. China is a big country of producing bicycles and motorcycles. The output of motorcycles and bicycles (including 11.37 million of electric bicycles) in China reached 27.62 million and 70.39 million, respectively in 2010 and the population of motorcycles and bicycles was estimated to be 100 million and 600 million, respectively. The domestic bicycle exports hold a large proportion of the output. China's export of bicycles reached 58.16 million, accounting for 82.6% of the output, while the export amount of motorcycles was 10.68 million, accounting for 38.7% of its output. In addition, China also exported some motorcycle tires and bicycle tires. The consumption of BR in cycle tire sector was projected to be around 60 000 tons in 2010, accounting for 6.8% of the total. The production of bicycle and its tires is mainly distributed in Tianjin municipality, Guangdong, Jiangsu and Zhejiang provinces, while the production of motorcycle and its tires is mainly concentrated in Guangdong, Jiangsu, Fujian and Zhejiang provinces, etc
   In addition, a small amount of BR is also used in other sectors like the rubber hose and rubber belt, and the manufacture of golf ball.

3  Demand prospect

During the 12th Five-Year program period (2011-2015), China will still accelerate the development of both urbanization and heavy industrialization. China’s economy will grow by around 7% annually. Automobile industry will enter a period of maturity and both the demand and population of automobiles will increase constantly. At the same time, China’s leading position in rubber processing, and electronic and electrical appliances manufacturing will not change greatly during 2011-2015, and the exports will still be the driving force for the demand growth of BR.
   With the rapid growth of China’s economy and the release of the stimulus policy after the financial crisis, both the output and sales volume of automobiles have grown rapidly. China’s sales volume of automobiles exceeded 10 million in 2009 and reached 18.33 million in 2010, hitting the historical highest level. However, the output growth of automobiles in China slowed down apparently in 2011. From the view of the car ownership per thousand populations that represent the popularity level of automobile, China’s passenger car ownership per thousand populations was 34.76 in 2010, much lower than 451, 453, 503 and 258, respectively in the United States, Japan, Germany and Korea in 2008. China’s automobile industry still has larger development space. Combined with the factors such as the future development of the domestic economy mode and the change of the domestic population structure, the relevant state agencies have predicted that by the end of 2015, the demand for automobiles in China will reach around 27.5 million, of which the demand for passenger cars will be around 20.0 million. China’s automobile population will reach around 176 million, of which the passenger car population will be around 120 million, and the passenger car ownership per thousand populations will reach around 90.
   During the 12th Five-Year program period, the export of rubber products like tires will still continue to increase. However, due to the high concentration of the main export markets, and the issue and implement of USA's special protection tariff on Chinese-made tires, the EU's REACH regulation and tire labeling regulation, China’s export of rubber products like tires has been or will be affected. It is therefore expected that the export growth of rubber products like tire will slow down in the future. In addition, other factors that will cause the slowdown of export growth include RMB appreciation, the constant rise of labor cost, industrial transfer and trade protectionism like anti-dumping.

4  Capacity expansion

From the view of the information in hand, China’s capacity of BR is expected to exceed 1.5 million t/a by 2015, and the newly added capacity of BR will be around 880 000 t/a during 2011-2015. The capacity of BR in China will also be far beyond that in the United States and China will become the largest BR producer in the world. The capacity proportion of BR in the total capacity of synthetic rubbers will increase from 23.2% in 2010 to 30.4% in 2015.

Table 1 China’s Newly-constructed or Planned BR Project  thousand t/a
Company     Capacity    Remarks

Sinopec Beijing Yanhua Petrochemical Co Ltd    30    Construction was started in May 2011, Rare earth/Ni-cis-polybutadiene rubber

Jiangsu GPRO Group and KUO of Mexico    100    Planned to start up in December 2012

Sinopec Maoming Petrochemical Co Ltd    100    Construction was started on September 1, 2011, the intermediate handing-over is expected to be conducted on October 30th, 2012

Shandong Yuhuang Chemical Co Ltd    50    Under construction

Tianjin Lugang Petroleum Rubber Co Ltd    50    Planned

Xinjiang Land Fine Petrochemical Co Ltd    50    Intermediate handing-over was conducted on November 28th, 2011

Zibo Qixiang Tengda Chemical Co Ltd    50    Construction was started in March 2011, planned to start up in 2013

Formosa Plastics Synthetic Rubber Industry (Hong Kong) Co Ltd     50 (in Ningbo, Zhejiang province)    Planned to start up in 2013

PetroChina Sichuan Ethylene Co Ltd     150    Planned to start up in 2012

Transfar Group    100    Made announcement on May 28th, 2011

Liaoning Shengyou Rubber Technology Co Ltd    30    Construction was started on February 19th, 2012, planned to start up in 2014


From the view of the international market situation, the raw materials of ethylene in the United States and the Middle East tend to be light and their C4 resources are less. China’s capacity of BR will be greater than the demand. At the same time, due to the more imports of BR through processing imported materials trade as well as the need for the import of the high-end products, it will be difficult for some BR units to operate at full load. To sum up, it is expected that the supply and demand of BR in China will be basically balanced or a small supply surplus in 2015.