Domestic NBR Market Competition Becomes Fiercer

By Zhang Mingran, the Jilin Design Institute of PetroChina Northeast China Refining & Chemical Engineering Co Ltd

The production increases rapidly
In recent years, the rapid development of China's automobile industry has offered a new opportunity for the development of rubber industry and also a good chance for the capacity release of acrylonitrile-butadiene rubber (NBR) units. As of the end of 2011, China had four NBR (solid) producers with a total capacity of 163.5 thousand t/a. Of which, PetroChina Lanzhou Petrochemical Co Ltd had three sets of NBR units (one set of hard rubber unit and two sets of soft rubber units) with a total capacity of 69.5 thousand t/a, Zhenjiang Nantex Chemical Co Ltd owned a 34 thousand t/a NBR unit and PetroChina Jilin Petrochemical Co Ltd had a 10 thousand t/a NBR unit. Ningbo Shunze Rubber Co Ltd started up its 50 thousand t/a NBR unit in June 2011, making the company the fourth NBR producer in China.
   In 2011, domestic NBR producers had a good economic performance. Especially Ningbo Shunze Rubber Co Ltd completed a 50 thousand t/a NBR unit and put it into operation, making China’s NBR output reach a new historical level of 100.5 thousand tons, up 25% year-on-year.
   Domestic NBR units maintain a high operating rate and have good economic benefits. Along with the good expectations on the future development, the enthusiasm of domestic and foreign enterprises for investing in NBR production has been stimulated. For example, in early 2012, Zhenjiang Nantex Chemical Co Ltd expanded the capacity of its NBR unit in Zhenjiang of Jiangsu province from 34 thousand t/a to 50 thousand t/a. LANXESS-TSRC will start up its 30 thousand t/a NBR unit in Nantong of Jiangsu province in 2012, and the unit will produce medium and high grade NBR products. INSA GPRO (Nanjing) Synthetic Rubber Co Ltd, a joint venture between Kuo SAB of Mexico and Jiangsu GPRO Group, will hopefully start up a 60 thousand t/a NBR unit in the first quarter of 2014. China BlueStar (Group) Co Ltd also plans to construct a 40 thousand t/a NBR unit. If these units can be completed and put on stream on schedule, the NBR capacity in China will reach 310 thousand t/a by 2014.

Demand growth slowdown

NBR in China is mainly used for the production of automobile components, electric wires/cables, adhesives and printing equipment components, etc. Over 50% of NBR in China is used to manufacture various automobile components, so the development of automobile industry has the greatest influence on NBR sector. Data from China Association of Automobile Manufacturers (CAAM) shows that in 2011, vehicle production in China increased 0.84% and the number of vehicles sold rose 2.45% to 18.51 million, being the lowest growth rate in the past 13 years. Along with the demand growth slowdown in related sectors like mechanical and electrical as well as household appliances, China’s apparent consumption of NBR was around 180.5 thousand tons, down around 0.8% year-on-year. As seen from Table 2, the growth of China’s NBR apparent consumption slowed down, and the self-sufficiency rate increased and reached 55.7% in 2011, up 12 percentage points compared to the previous year.
   China cut its GDP growth target for 2012 from 8% to 7.5%. The slowdown of GDP growth has an impact on the related markets. It is expected that China’s NBR demand will grow by around 6% in the next few years and reach 230 thousand tons by 2015.

Table 1 China’s NBR unit in 2011
Producer    Capacity (kt/a)    Product brands     Output (kt)     Operating rate (%)

PetroChina Jilin Petrochemical    10    NBR-220S, NBR-2209H, NBR23OS, NBR-23OSL and NBR240S    -    -

PetroChina Lanzhou Petrochemical    4.5(hard rubber)    NBR-3604, NBR-2707 and NBR-17043     -    -
         15 (1# soft rubber)    Brands of products using continuous method: N-21, N-31, N-32 and N-41    15.3    102
        50 (2# soft rubber)    Brands of products using intermittent method: DN003, DN401, DN214, DN631 and N-34    39.1    78.2

Zhenjiang Nantex Chemical Co Ltd    34    General type, fast-vulcanizing type and special type (carboxyl NBR, NBR/PVC copolymer and dioctylphthalate (DOP) plasticizing NBR, etc.)    32.1    94.4

Ningbo Shunze Rubber Co Ltd    50        14    28
Total    1 63.5        100.5    
Source: CNCIC

Table 2 Supply and Consumption of NBR in China during 2007-2011 (kt)
Year    2007    2008    2009    2010    2011
Output    40.4    41.8    48.1    79.6    100.5
Imports    98.0    98.5    111.2    104.6    84.7
Exports    2.1    1.2    1.2    2.2    4.7
Apparent consumption    136.3    139.1    158.1    182.0    180.5
Self-sufficiency rate (%)    29.6    30.0    30.4    43.7    55.7
Source: CNCIC


Imports decline

Although the output of NBR in China increased considerably in 2011, it still could not meet the domestic demand. Especially, some special NBR products still relied on imports. According to customs statistics, China’s import volume of NBR (excluding latex) in 2011 was 84.7 thousand tons, down 19% year-on-year. Of which, the import volume of NBR in primary forms (excluding latex), and NBR in plates, sheets and strips accounted for 34.6% and 65.4% of the total, respectively. Meanwhile, China also exported a small amount of NBR. In 2011, the export volume of NBR in China was 4.7 thousand tons, of which the export volume of NBR in primary forms (excluding latex) accounted for 68.1% of the total.
   China's imports of NBR mainly came from Korea, Japan, Russia and France. In 2011, the import volume of NBR from the four countries totaled around 76.4 thousand tons, accounting for 90.2% of China's total NBR import volume.
   In term of import mode, China’s import of NBR mainly comes from general trade mode, small-scale border trade and processing imported materials. In 2011, the import volume through the three trading modes was 74.9 thousand tons, accounting for 88.5% of the total.
   With the normal operation of a new 50 thousand t/a NBR unit in Ningbo Shunze Rubber Co Ltd as well as the startup of the new units in Zhenjiang Nantex Chemical Co Ltd and LANXESS-TSRC, China’s NBR output will further increase in 2012. It is expected that the total import volume of NBR in China will continue to decrease in 2012.

Table 3 Import and Export of NBR in China during 2007-2011  (kt)
Year    NBR in primary forms(excluding latex)    NBR in plates, sheets and strips    Total
    Import volume     Export volume    Import volume    Export volume    Import volume    Export volume
2007    36.4    1.0    61.6    1.1    98.0    2.1
2008    37.4    0.9    61.1    0.3    98.5    1.2
2009    47.9    0.8    63.3    0.4    111.2    1.2
2010    38.0    1.3    66.6    0.9    104.6    2.2
2011    29.3    3.2    55.4    1.5    84.7    4.7
Source: CNCIC

Table 4 Import Sources of NBR in China in 2011 (thousand tons, %)
Source    NBR in primary forms(excluding latex)    NBR in plates, sheets and strips    Total
    Import volume    Proportion volume    Import volume    Proportion     Import volume    Proportion
Korea    16.7    57.1    15.9    28.7    32.6    38.5
Japan    3.0    10.2    13.9    25.1    16.9    20.0
Russia    0.2    0.7    15.5    28.0    15.7    18.5
France    5.2    17.7    6.0    10.8    11.2    13.2
Others    4.2    14.3    4.1    7.4    8.3    9.8
Total    29.3    100.0    55.4    100.0    84.7    100.0
Source: CNCIC

Table 5 Import Mode of NBR in China in 2011   (kt, %)
Import mode    NBR in primary forms(excluding latex)    NBR in plates, sheets and strips    Total    Proportion
General trade mode    15.8    31.2    47.0    55.5
Small-scale border trade    0.0    15.4    15.4    18.2
Processing imported materials    8.2    4.3    12.5    14.8
Storage of transit goods in bonded warehouses    2.4    3.3    5.7    6.7
Processing with supplied materials and assembling trade    2.8    1.2    4.0    4.7
Others    0.1    0.0    0.1    0.1
Total    29.3    55.4    84.7    100.0

Violent price fluctuations in 2008

The NBR (N41) market in China had violent fluctuations in 2011. The price of NBR increased in the first 8 months of 2011. It rose from RMB23 200 per ton at the beginning of the year to around RMB33 500 per ton in August. The price plummeted afterwards, touched RMB19 200 per ton in November and rebounded slightly at the end of 2011. In January 2012, the price rose to RMB25 000 per ton.
   These are the main factors in the violent price fluctuations of NBR in 2011:
1. Direct influence by the price change of raw materials butadiene and acrylonitrile.
2. The increase of NBR capacity and output, and the downstream demand growth slowdown in China. Two new NBR units will be completed and put into operation in 2012, the growth of capacity and output will surely aggrandize the fierce market competition between domestic NBR products and imported products, and the price competition will also be fiercer.
   Domestic NBR enterprises should improve their competitiveness

NBR demand in China was brisk and the domestic capacity of NBR also increased sharply from 49.5 thousand t/a in 2008 to 163.5 thousand t/a in 2011. However, the capacity growth and the price advantage of domestic products still could not stop the influx of the imports mainly because domestic NBR products had single varieties and lagged behind the imported products in quality and after sale service, etc.
   Domestic enterprises should therefore actively develop a variety of marketable varieties and brands according to the market demand, and at the same time, strengthen the R & D of special NBR products with unique performance and high added value. In addition, Chinese customers feature small consumption, a wide variety of NBR products and various processing technologies. Therefore, the appropriate after sale service is one of the important means to broaden the application field and the marketing channel.