Regular IIR Market and HIIR Market may Perform Differently

Recently, Sinopec Beijing Yanshan Company completed the maintenance. The maintenance at N plant in Russia also came to end. The price was at a high level, thus market participants adopted a cautious stance. According to SCI, the price of regular IIR and IIR may show different trends.

Supply analysis：As for the units, Panjin Heyun Industrial and Formosa Synthetic Rubber (Ningbo) kept the unit shut for a long time. It will be difficult for them to resume production in the short run. The unit at Sinopec Beijing Yanshan Company produced regular IIR after the maintenance. The unit at Shandong Chambroad Petrochemicals producedHIIR. Zhejiang Cenway New Materials maintained normal production. It mainly produced HIIR, and the output of regular IIR was small.

According to SCI’s statistics, from January to May, the output of regular IIR was around 19.2kt, up 3.8% Y-O-Y, while that ofHIIR was 49.7kt, up 26% Y-O-Y

From January to April, the import volume of regular IIR was about 20.335kt, up 4% Y-O-Y, while that ofHIIR was 51.356kt, down 32% Y-O-Y.

It was learned that the inventory of regular butyl rubber at producers was about 2kt, while that ofHIIR was 6kt.

It was heard that Shandong Chambroad Petrochemicals planned to conduct maintenance in July.

Demand analysis: As for all-steel tire, as the influence of external factors was eliminated in Shandong, the overall operating rate at all-steel tire plants fluctuated upwards. In addition, it was learned that sales were moderate, and the inventory may keep growing. The inventory pressure at some plants was high. As for semi-steel tire, the export market performed passably. Sales in the domestic market were moderate, dragged down by the sales decline in the OE tire market. The inventory at most plants was at one-month’ worth. According to SCI, the operating rate at all-steel tire plants in Shandong was 74.69% on June 14, up 5.09% M-O-M, and up 4.57 Y-O-Y. The operating rate at semi-steel tire plants in China was 72.95%, up 1.53% M-O-M, up 7.16% Y-O-Y.

Downstream tire plants still purchased feedstock on a need-to basis. The overall feedstock inventory can be consumed for 15-30 days, and that at large rubber product enterprises can be consumed for 30-40 days.

Cost analysis: Recently, the price of MTBE dropped notably. Thus, the cost of IIR producers slipped. The overall profit was passable.

Overall, the supply-demand fundamental is the most important factor to influence the price. Based on the resources from January to May, the supply of regular IIR increased Y-O-Y. Although the output of HIIR increased, the import volume dropped obviously. Thus, the overall supply saw limited changes. At present, the operating rate at downstream tire and pharmaceutical plants is fairish, which lends some support to the demand for IIR. The price of MTBE slips, so IIR producers’ profit is passable. With the unit at Sinopec Beijing Yanshan Company resuming production, the supply of regular IIR will gradually increase. SCI predicts that the price of regular IIR will inch down in the coming period, while that of HIIR will hold firm.

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