China IIR Market Underperformed Nov 2022
China’s IIR market price registered a downtrend starting from H2 of September. In November, market prices fluctuated at lows. The future of the market looks far from rosy in the short term with relatively sufficient supply and limited recovery of end demand.
China IIR Market Price Trend
In H2 of September, China’s domestic IIR market price fell from a high level as most downstream producers showed resistance to high prices of feedstock and prices of imported resources dropped significantly. The market price continued to show a sideways trend at a low level until October. Up to now, the average price of regular IIR 1675N in Jiangsu was about RMB 16,900/mt, down 2% from October. Chinese-made 532 averaged about RMB 16,750/mt, which decreased by 2.2% from October.
IIR Supply
SCI learned that Sinopec Yanshan Petrochemical Company stopped production in July, and the unit maintenance at Zhejiang Cenway New Materials was from July to August, which reduced the output of IIR in China significantly. Less routine maintenance of IIR units occurred in October. The unit at Sinopec Yanshan Petrochemical Company was shut down, and Formosa Synthetic Rubber (Ningbo) remained shut. Other IIR units were all in production in October, so the output loss caused by unit shutdown decreased, driving up the supply of Chinese-made IIR.
According to GACC, China’s IIR import volume was about 24.2kt in October, which decreased by 1.8% from last month but increased by 91% Y-O-Y. USD prices of imported resources decreased significantly from H2 of October to the middle of November, which was also affected by the decrease in the exchange rate. The price spread between China’s domestic and international IIR markets is narrowing, exerting pressure on the domestic market price trend.
Market Outlook
In terms of supply, the 70kt/a unit at Shandong Chambroad Sinopoly New Material was shut down in November, but the supply in China’s domestic IIR market was expected to be relatively sufficient in the short term. As for imports, the import volume in 2022 increased significantly from last year, so the overall inventory was relatively high.
In terms of demand, although the operating rate at tire producers in H1 of November increased from October, the market sentiment saw limited improvement, which restricted the market liquidity. As the weather turned colder, the demand in the north weakened, imposing a constraint on the increase in IIR consumption.
The IIR unit at Panjin Cenway New Materials is expected to be shut down in December, reducing the supply of Chinese-made IIR. Besides, some downstream producers are expected to stock up in December, pushing up the purchase volume of IIR. However, given the lower operating rate at downstream producers compared with that in the same period of previous years, the increase in IIR demand may be limited. Uncertainties lie in the market, which may affect the purchasing rhythm before the Spring Festival. Some domestic IIR agents may continue to maintain capital reserves to enter the market at an appropriate time. In general, the end demand may continue to be weak, and uncertainties lie in the release of downstream demand for IIR. Therefore, the fundamentals of IIR may barely support the IIR market, and the market price may fluctuate at a low level.
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