ITRC Conference Reached No Consensus on Rubber Export Limitation

Chatcheai Sarikulya, Minister of Thai Agriculture and Cooperatives, showed on September 15 that the ITRC (International Tripartite Rubber Council) members (Thailand, Malaysia and Indonesia) decided to take Vietnam into the ITRC. The rubber output of the first 3 countries takes up nearly 70% of the total world output. The proportion will reach nearly 80% when Vietnam joins the organization. However, no consensus on rubber export limitation was reached during the conference held in Bangkok. The Minister also showed that the members would focus on the rubber prices, and the export limitation would still be an option.

On September 19, 2017, Hankook Tire, the largest tire manufactures in South Korea, announced that its tire plant in the U.S. launched the all-season vehicle tire. According to sources, Hankook’s investment to the U.S. tire plant is as high as $800,000,000 (about 5.3 billion RMB). The tire plant is set to improve Hankook’s market shares in the U.S. market. The plant may recruit about 1,800 working staffs. The designed capacity of the U.S. tire plant is 1.2 million pieces per year.

Ningxia Shenzhou’s tire project with the annual capacity of 20.1 million pieces of radical tires was approved by the Ningxia Government on March 15, 2013. The designed annual capacity includes 10 million pieces of all-steel radical tires, 10 million pieces of semi-steel tires and 0.1 million pieces of aircraft tires. Phase I, with the annual capacity of 2.4 million pieces of all-steel radical tires, has been put into use from May 27, 2015.

The infrastructure construction of Phase II will end in end-2017, and units will be put into production in H1, 2018. The designed annual capacity of Phase II is 2.4 million pieces of all-steel radical tires. The designed annual capacity of Phase III of Ningxia Shenzhou includes 10 million pieces of semi-steel radical tires, and Phase IV include 2.4 million pieces of all-steel radical tires and 5,000 pieces of OTR tires. Phase III and Phase IV are estimated to be put into use in H1, 2019. The trading volume of all phases of Ningxia Shenzhou Tire can reach 16 billion RMB. Beyond that, the project can provide 10,000 jobs. The Ningxia Shenzhou Tire may develop rapidly when all phases are put into production.

In 2017, SIS prices kept dropping all the way. The SIS EXW price hit a new record low at the end of July since SIS product was put into the market. As the newly-built units in 2016 were put into production gradually, the inventory pressure at the major producers was high in July. As it was in the low demand season for SIS, the market saw SIS oversupply. Besides, the pentadiene price was also at a lower level, dragging down the SIS prices to some extent. The profit was low in the SIS industry, and producers faced great selling pressure. Some private producers were even faced losses.

However, SIS saw two rounds of price rebounds recently. Taking Sinopec Baling Petrochemical for example, the EXW price rose twice and altogether increased RMB 1,300/mt, which was beyond the market players’ expectations.

SCI believes that there were three reasons for the price changes. First, the operating rate in the SIS industry has been dropping greatly since August. The operating rates in the first two weeks of September were 13% and 26% respectively. The supply from the producers declined, and the market inventories were consumed by the users. Second, the price of isoprene, the main feedstock of SIS, rebounded, increasing the cost of SIS producers. Third, although it was in the off season for the SIS industry, the market demand increased steadily. With China's new two-child policy and the promotion of disposable hygiene products, the demand for SIS increased. The water-proof industry also supported the demand for SIS.

As for the overall supply and demand structure, it still needs time for the production recovery at the major enterprises. The off season for SIS comes to an end, and the market demand will increase in the future. The isoprene price remains high, supporting the SIS cost. Bullish factors for the supply and demand may release gradually. The SIS EXW price may continue increasing in the short run.