VINACHEM

Part of the reason for the Asian rise, despite reduced production in ABS and polybutadiene, has been the continued strength of natural rubber, which in turn affects its synthetic counterparts. This has led to either resistance or acceptance of butadiene feedstock prices when they rise or fall.

Tire producers are the biggest consumers of natural rubber, especially
for those based in China. In 2011, the country imported 2.1 million mt of natural rubber, up 13% from 1.86 million mt in 2010, Chinese customs statistics showed. That figure is expected to rise in 2012 according to the Association of Natural Rubber Producing Countries, which expects China to import 2.950 million mt during 2012.

The ANRPC comprises Thailand, Indonesia and Malaysia – the top three natural rubber producers – Cambodia, China, India, Papua New Guinea, the Philippines, Singapore, Sri Lanka and Vietnam. At the end of December 2011, China’s natural rubber stockpiles reached 365,600 mt, nearly eight times the 46,100 mt recorded at the end of July.

Among the reasons cited for the inventory surge was weak demand from local tire makers, who in turn, cited poor demand from US and Europe. In January, market participants saw gains in spot rubber prices. This resulted from a plan by Thailand to spend Baht 15 billion ($472 million) to buy 200,000 mt of natural rubber from local growers and support local natural rubber prices at Baht 120/kg. The plan was approved by the Thai cabinet on January 24. Buying was expected to begin in mid-February, but was delayed to the middle of March due to legislative processes. Many in Asia have attributed the rise in natural rubber prices to the rebound in butadiene levels. Expectations of further increases in
natural rubber have also led to a rush to secure March butadiene cargoes in China and South Korea despite overall demand being down on historical levels.

China is Thailand’s major customer, and is expected to buy 1.2 million mt of natural rubber from the Southeast Asian country, unchanged from 2011.

In 2011, Thailand produced about 3.4 million mt of natural rubber, or nearly 34% of the 10.1 million mt produced by members countries of the ANRPC.

In January, the Thai Rubber Association has forecast that Thailand will export 2.8 million mt in 2012, up from about 2.7 million mt in 2011, and the country will produce around 3.15 million mt versus 3 million mt year on year.

Natural rubber output from Thailand may increase to 3.5 million mt in 2012 from 3.21 million mt in 2011, the state Office of Agricultural Economics has said.

A rise in production is expected, according to the Goldman Sachs report, which forecast that a natural rubber glut will emerge in 2012, which could lower costs for tire makers.


This year, the market is expected to swing to a 413,000 mt surplus from an 87,000 mt deficit in 2011, the US bank said. “If natural rubber prices average around $4.00/kg in 2012, as we are forecasting, tire makers would benefit from a nearly $1.00 input price decline compared to 2011, when manufacturing inputs trended around $5.00/kg. We expect the Japanese tire makers to reach peak margins around Q2 2012 on the combination of this factor and the boost from price hikes,” Goldman Sachs said.

ANRPC estimates that natural rubber production in 2012 will grow by 3.1% to 10.415 million mt during 2012, compared to about 10.100 million mt in 2011.

The group’s natural rubber exports slowed to 7.655 million mt for 2011, a 2.4% rise from 2010, which recorded a 10.4% rise from 2009. “The lower export growth during 2011, as compared to 2010, largely reflects the commodity’s sluggish demand outlook in the backdrop of unfavorable developments in the global economy. Total volume of exports anticipated for 2012 is 7.828 million mt, up 2.3% from 2011,” the ANRPC said.

There are market concerns that tire producers would turn more to synthetic rubber as opposed to natural rubber, although tire makers are unlikely to make quick changes to their respective formulas for tires. The synthetic rubber industry faces its own challenges as new capacity comes online but feedstock butadiene supply is lagging.

In April 2011, China’s Tianjin Lugang Petroleum & Rubber started up a new 100,000 mt/year styrene-butadiene-rubber plant at Dagang District, Tianjin province.
In December 2011, China’s Keyuan Petrochemicals has started commercial production at its new 70,000 mt/year styrene- butadienestyrene plant at Ningbo, Zhejiang province
.
In May 2012, PetroChina’s Fushun Petrochemical is expected to begin operations of a 200,000 mt/year SBR plant. As for new butadiene production capacity in Asia, in late September 2011, BASF Yangzi Petrochemical Company, or BASF-YPC, brought a new 130,000 mt/year butadiene extraction plant online.

In Indonesia, Chandra Asri started construction of a 100,000 mt/year butadiene plant at Cilegon, Banten province, which will be operated by Petrokimia Butadiene. The plant is expected to begin operating in mid-2013 and about 50% of the production is expected to be sold to domestic tire makers while 50,000 mt/year is targeted at overseas buyers, especially in South Korea.

In February 2013, Indian Oil Corp. is expected to start operating a 138,000 mt/year butadiene extraction plant at Panipat.