Late Nov IIR Market Price to Continue Downtrend
Introduction: Recently, affected by stable supply and downstream buyers’ wait-and-see sentiment, traders faced sales pressure, and IIR market prices fell. In the short run, the supply-demand fundamentals may hardly form an effective drive to IIR prices, and it is predicted that IIR market prices may continue to fluctuate downwards in H2 of November.
IIR mainstream prices dropped amid sluggish supply-demand fundamentals.
In H1 of November, IIR market prices showed an overall downtrend. As for supply, domestic supply was stable amid the normal production of domestic units, and some imported resources also arrived, leading to sufficient spot circulation volume, which failed to support the IIR prices. As for demand, downstream enterprises mostly adopted a wait-and-see stance and purchased on rigid demand. The weak demand resulted in an insipid trading atmosphere. Overall, the supply-demand fundamental dragged the IIR market prices, leading to a decline in the mainstream prices. According to SCI, as of November 15, the market average price of regular IIR 1751 produced by Sinopec Yanshan Petrochemical was RMB 16,250/mt, down RMB 200/mt from the end of October.
Poor demand dragged down IIR market prices
In the middle of November, the operating rates of all-steel tire enterprises and semi-steel tire enterprises were 59% and 78.75%, respectively, which increased by 3.1% and 0.31% from the end of October. The decline in the operating rate of all-steel tire enterprises was relatively large. Firstly, the sales pace of some producers slowed down, dampening the production enthusiasm. Secondly, the increasing pressure on tire inventory gradually emerged, which exerted certain restraints on the operating rate. Due to the decline in the operating rate of tire enterprises and the concentrated restocking of feedstock before the National Day holiday, tire enterprises mainly consumed the existing inventory of IIR, with weak purchasing willingness, which led to a dull trading atmosphere in the IIR market.
Feedstock prices fluctuated at lows.
Taking the feedstock MTBE as an example, the price of MTBE showed a slight rebound in early November. However, the upward range was limited and the price remained at a relatively low level. Taking the price of MTBE in the Shandong market as an example, as of November 15, the market price reached RMB 5,475/mt, up RMB 130/mt from the end of October. The quite limited range of MTBE price rebound was unable to provide strong support for the market price of IIR.
IIR market prices may continue to fluctuate downwards in the short run.
Supply: Domestic supply will likely remain largely stable as main IIR producers mostly arrange steady production.
Demand: As producers that resumed production continue to release capacity, the operating rate of all-steel tire enterprises will probably show a restorative upward trend. Meanwhile, supported by export orders and reasonable inventory, the operating rate of semi-steel tire enterprises may narrowly fluctuate. However, in the short term, downstream enterprises will most likely continue to purchase IIR on rigid demand. The supply-demand fundamentals are unlikely to form an effective driving force on IIR prices.
Cost: In late November, the MTBE output is expected to inch down, and some previous export orders may start to be delivered successively, so the supply of MTBE may tighten slightly. In terms of demand, recently, the transactions of refined gasoline shipments by local refineries have been going well, providing certain support for the demand for MTBE. It is expected that the price of MTBE will probably experience narrow fluctuations, thereby leading to limited cost support to the IIR price.
Overall, both supply and demand as well as costs are unlikely to drive the market price of IIR. The IIR market atmosphere may hardly improve significantly, and it is expected that the weak fluctuating trend of IIR prices may continue.
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