Q1 NBR Market Prices Dwindle After Increase
In Q1 of 2023, the NBR market price climbed first and then dwindled amid weak demand and relatively strong expectations of supply. In Q2, despite the intensive NBR unit maintenance, the demand is the main driver for the NBR market price. SCI will review the NBR market price, supply and demand in Q1 and forecast the market in Q2.
In Q1 of 2023, the NBR market price climbed first and then dwindled. Taking 3305E produced by PetroChina Lanzhou Petrochemical as an example, as of Mar 27, the closing price was about RMB 15,000-15,300/mt, which increased by 3.06% from the beginning of the year but decreased by 14.41% from the highest point in February. As of Mar 27, the average price of NBR in Q1 was 16,409/mt, which increased by 12.48% from last quarter but decreased by 30.55% Y-O-Y.
Specifically, the NBR market price fluctuated upward from January to H1 of February. On the one hand, with the relaxation of some external constraints, some market players’ mentality improved. At the same time, some units were scheduled to be overhauled, so the supply was expected to decrease. On the other hand, the feedstock butadiene price showed a rising trend during this stage, which pushed NBR prices up. However, the NBR market price turned downward in H2 of February. At that time, the bullish effect of the unit maintenance gradually subsided, and the downstream demand recovery failed to meet expectations dragged by end orders, resulting in slow consumption of low-priced inventory. Some goods holders sold their goods at prices even lower than the cost.
Expected supply reduction of Chinese-made NBR with unit maintenance plans
Q1 2023 China NBR Units Running Status
The expected changes are the main drivers of price fluctuation. Specifically, the short-time price increase in Q1 was attributed to the expected supply reduction of Chinese-made NBR with the release of news of unit maintenance in Northwest and East China. At the same time, the import volume increased affected by the expected supply of Chinese-made goods. In Q1, China’s NBR output was 58.6kt, down 4% M-O-M but up 14% Y-O-Y. According to GACC, the total import volume of NBR was 14.1kt from January to February 2023, which increased by 21.83% Y-O-Y.
Weaker-than-epxected demand recovery restricted NBR price increases
The automobile industry is the largest end consumption market of NBR, and its demand needs to be further released. Due to the removal of various vehicle-buying incentives, the recovery in automobile consumption was relatively slow. According to China Association of Automobile Manufacturers, from January to February 2023, the output and sales volume of automobiles reached 3.626 million and 3.625 million respectively, down 14.5% and 15.2%. The NBR consumption growth was restricted by the slow recovery of the end consumption market, which further put downward pressure on the NBR price. Besides, despite the comparatively optimistic export performance, the market was not supported by it because of its small base. According to GACC, China’s total export volume of NBR was 3.5kt from January to February 2023, which increased by 62.9% Y-O-Y, but it accounted for less than 6% of China’s NBR output.
Source: China Association of Automobile Manufacturers
Q2 Forecast
As for supply, ARLANXEO-TSRC (Nantong) Chemical Industrial and PetroChina Lanzhou Petrochemical have maintenance plans in Q2, so the supply is expected to be cut. As for cost, with intensive unit maintenance, the butadiene price may show an upward trend. Given the supply reduction and strong cost, the NBR market price is expected to rebound from the bottom, but the room for the price increase is anticipated to be restricted by the demand. Some downstream producers show limited enthusiasm in operation due to the poor performance of end orders, especially foreign trade orders, and it needs more time for the recovery of downstream demand. At the end of Q2, as the bullish effect of unit maintenance subsides and the traditional slack season of demand approaches with higher temperature, the NBR price growth may be hampered by then.
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