Post-Holiday IIR Market Sees Limited Fundamental Support, Fostering Strong Wait-And-See Sentiment
After the Spring Festival holiday, supportive factors of IIR fundamentals were limited. Even with the tight supply of some imported resources in the spot market, the market registered stable performance, and industry players adopted a strong wait-and-see attitude.
Post-holiday IIR prices tended to stabilize.
As of February 27, the price of regular IIR 1675N in the Jiangsu market was RMB 15,500-16,000/mt, which remained unchanged compared to the last working day before the holiday. The monthly average price was RMB 15,750/mt, which increased by 0.43%. In the same period, the price of HIIR 2030 was RMB 25,000-25,500/mt, with the monthly average price roughly the same as last month.
Downstream tire operating rate dropped significantly.
In February, the average operating rate at all-steel tire producers in Shandong was 34.05%, down 20.20 percentage points M-O-M; the average operating rate at semi-steel tire producers was about 51.45%, down 19.53 percentage points M-O-M. The tire industry’s operating rate in February fell to its lowest point of the year, mainly due to reduced production time over the Spring Festival holiday and the slow return of employees post-holiday, which affected the recovery of daily production in the preliminary stage of work resumption.
Downstream tire producers adopted a conservative purchasing strategy. Tire producers preferred to consume low-cost inventory before resuming normal production after the holiday, resulting in generally low purchasing interest towards feedstock. Most of the downstream producers adopted a wait-and-see approach.
Isobutylene prices fell, weakening cost support.
In February, China’s domestic isobutylene market prices showed a weak trend. As of February 27, the average market price was RMB 10,275/mt, which decreased by RMB 175/mt or 1.67% from the beginning of the month. At the beginning of February, China’s domestic isobutylene price was RMB 10,450/mt, which was the peak for the past four months. The initial price decrease was driven by strong de-stocking demand from upstream enterprises before the Spring Festival, and downstream producers’ slow work resumption resulted in insufficient demand, which became the primary cause of the weak price trend.
The market is expected to register stable performance with good momentum for growth in the short term.
In the short term, as the holiday period concludes and the downstream production gradually resumes, downstream producers’ operating rates may grow. In terms of costs, if domestic demand slowly recovers, the isobutylene market may edge up. In terms of supply, the operating rates of domestic units may remain at the current level, but it is worth noting that the spot supply of some imported resources may increase slightly. Overall, the demand for IIR is expected to pick up in March, and the IIR market price is estimated to be solid with the tendency to improve amid the tug of war between supply and demand.
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