Q1 2025 IIR Market to Rebound after Dipping
Introduction: In Q4 2024, the spot supply of IIR was relatively ample, and most downstream enterprises mostly made just-needed purchases. Traders faced pressure in selling goods at high prices. As a result, the market price of IIR fluctuated downwards. Looking ahead to Q1 2025, the Spring Festival holiday falls within this period, which will curb the overall operation of downstream industries. However, there is an expectation that some domestic IIR units may undergo maintenance in March. It is predicted that the market price of IIR may experience downside fluctuations followed by a slight rebound.
Weak supply and demand led to downward adjustments of market price in Q4.
In early October 2024, influenced by the rising price of feedstock MTBE and the tight supply of some imported goods, the market prices of some IIR grades moved up. However, after November, downstream enterprises such as tire manufacturers made just-in-time purchases at low prices to meet their rigid needs. Traders faced pressure in selling goods at high prices. In terms of supply, most domestic IIR units maintained normal production, and the import volume increased, leading to relatively sufficient spot supply. Both supply and demand exerted a certain degree of restraint on the market, causing the market price of IIR to decline. According to SCI, as of December 31, the closing price of 1675N in East China was RMB 16,050/mt, down RMB 400/mt compared to the high point in Q4.
Ample supply dampened the Q4 market atmosphere
In Q4 2024, the gross profit level of the domestic IIR industry remained positive. Supported by this profit margin, the 120kt/a unit at Shandong Chambroad Sinopoly New Material and the 200kt/a unit at Zhejiang Cenway New Materials in China operated normally. The output of IIR stayed at a high level, ensuring an abundant supply of domestic products. In terms of imports, from October to November 2024, China imported approximately 49.9kt of IIR, a YoY increase of 18.53%. With the combined domestic and imported products, the supply of IIR in Q4 2024 was relatively ample, which weighed on the IIR market.
Low-hovering feedstock prices failed to provide effective cost support to IIR
In Q4 2024, the market price of feedstock MTBE showed a trend of first rising, then falling, and then oscillating upwards. During the National Day holiday, international oil prices climbed strongly. Market operators had a relatively positive attitude towards restocking. With smooth product shipments from MTBE producers, prices rose significantly. However, after the holiday, international oil prices fluctuated downwards. In terms of demand, gasoline consumption remained weak. With poor product shipments from MTBE producers, prices declined.
From November to December, the procurement demand of middlemen for gasoline feedstock such as MTBE increased. With smooth product shipments from MTBE producers, prices oscillated upwards. However, affected by the cost of blending gasoline, downstream players mainly purchased gasoline feedstock at low prices and adopted a wait-and-see attitude at high prices. Dragged by this situation, the upward range of the MTBE market was small, and the price was still at a relatively low level, providing limited support to the IIR market.
Impact of spring festival gradually emerging: Q1 IIR market may see a slight rebound after weak oscillation
Supply: From January to February, domestic IIR units are expected to operate as normal, with limited fluctuations in the supply of domestic products. In March, some units may be subject to maintenance, which could lead to a decline in the output of IIR. However, the current social inventory is relatively sufficient, so short-term unit maintenance is unlikely to boost the market. In terms of imports, overseas units are expected to operate normally in Q1, and imported products will continue to supplement the domestic market. Overall, it is expected that changes in supply in Q1 2025 will have limited driving force on the market price of IIR.
Demand: The Spring Festival holiday falls within January and February. Affected by this, some downstream tire manufacturers will start shutting down production for the Spring Festival in late January, and this shutdown is expected to last until the H1 of February. This will significantly drag down the overall industry operating rate. On the other hand, domestic demand will probably weaken in January and February. Coupled with the impact of some migrant workers returning home, the daily production level of tire manufacturers may be adjusted downward. As the operating rate of the downstream tire industry declines, the demand for IIR will also show a downward trend. The lackluster demand may suppress the IIR market in January and February. In March, excluding the influence of the holiday, the operating rate of tire enterprises is expected to have a restorative increase, and the demand for IIR may also show an upward trend. The demand in March may drive the price of IIR to a certain extent.
MTBE: In Q1 2025, the MTBE market is likely to show an oscillating upward trend overall, with March being relatively stronger. In January 2025, boosted by the Spring Festival holiday, the end consumption of gasoline is expected to increase, and middlemen still have stockpiling demand before the holiday, mostly restocking at low prices. Considering the potential increase in the supply of MTBE, the MTBE price is predicted to show a weak fluctuating trend amid the tug-of-war between buyers and sellers. After the Spring Festival holiday, there will be a short-term restocking wave in the market. It is expected that the MTBE price in February will rise first and then fall. In March, as the weather warms up, with the expected increase in gasoline demand, the MTBE price will probably rise slightly. As the main feedstock for IIR, the oscillating upward price of MTBE in Q1 will support the IIR market.
Overall, the IIR market price in Q1 2025 is likely to experience a weak oscillation followed by a slight rebound. From January to February, the domestic supply of IIR is expected to be stable. However, downstream demand is likely to be weak due to the influence of the Spring Festival holiday and other factors. Nevertheless, the cost side may rise in an oscillating manner, providing certain support. Thus, the market price of IIR is anticipated to fluctuate weakly. In March, downstream demand is expected to recover, and the cost side may continue to offer support, driving a rebound in the price of IIR.
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