In the first half of 2024, due to factors such as rising costs, relatively tight supply, and demand support, the rubber market rebounded and prices increased. Among them, natural rubber, butadiene rubber, and styrene butadiene rubber increased by 11.33%, 23.49%, and 23.74%, respectively. However, as we enter mid to late June, on the one hand, the supply of natural rubber raw materials has slightly increased and prices have slightly declined from high levels. On the other hand, the international crude oil market is experiencing weak fluctuations in raw materials such as butadiene and styrene. As a result, both natural rubber and synthetic rubber prices have slightly declined.
Firstly, in the first half of the year, natural rubber production areas were affected by factors such as the cut off period and weather, resulting in a sustained low production state. This led to a tight supply of natural rubber raw materials and a significant increase in overall prices, providing support for natural rubber prices; In the first half of the year, the prices of butadiene and styrene, raw materials for synthetic rubber, have significantly increased due to the surge in international crude oil prices and the impact of some equipment maintenance. As of June 29th, the price of Thai adhesive was 70.45 Thai baht/kg, an increase of 27.40% from 55.30 Thai baht/kg at the beginning of the year, and a decrease of 13.24% from the highest point of 81.20 Thai baht/kg in late March; As of the 29th, the purchase price of state-owned and gold rubber water based concentrated latex raw materials in Hainan production area was around 14,500 RMB/ton, an increase of 15.08% from 12,600 RMB/ton at the beginning of the year, and a decrease of 7.64% from the high point of 15,700 RMB/ton in late March. As of June 30th, the domestic price of butadiene was 13,700 RMB/ton, an increase of 59.77% from the beginning of the year price of 8,575 RMB/ton; The price of styrene is 9,416 RMB/ton, an increase of 10.01% from the beginning of the year price of 8,560 RMB/ton, and a decrease of 2.99% from the highest point of 9,706 RMB/ton.
Secondly, in the first half of the year, the overall rubber market was in a tight supply state, which supported the rubber market. At the beginning of the year, Thailand gradually entered a period of cutting cessation; Vietnam's production areas have gradually entered a period of cutting cessation, with 70-80% of them being cut off; The domestic Hainan and Yunnan production areas have entered a comprehensive shutdown period. Later, due to the impact of weather, drought, and rainfall, the production of natural rubber raw materials in both domestic and foreign production areas has increased slowly, resulting in a relative relief of supply pressure in the domestic natural rubber market. Qingdao Port's natural rubber inventory continues to slowly deplete, providing strong support for natural rubber. In addition, the production of butadiene rubber fluctuated significantly in the first half of the year, but overall remained at a low level. According to statistics, the start of production of butadiene rubber in early 2024 was around 520%, and after the Spring Festival, it increased to a peak of around 72% in half a year. Later, with the continuous maintenance of multiple devices, the start of production decreased again, dropping to a minimum of around 45% in late May. In June, the start of production slightly increased to around 58%. From the beginning of the year to early May, the overall production of butadiene styrene rubber remained between 62% and 70%. Starting from mid to late May, multiple butadiene styrene units gradually reduced their load, with production dropping to around 53%. As of the end of June, it rebounded to around 58%. Overall, in the first half of the year, there was a certain degree of decline in both natural rubber and synthetic rubber supply.
Finally, downstream tire production has gradually increased after the Spring Festival, and demand is facing strong support from the rubber market. During the Spring Festival, downstream tire production dropped to around 20%, and demand for rubber dropped to freezing point. After the Spring Festival, the production of tires gradually increased. Starting from March, the production load of semi steel tires in domestic tire enterprises remained around 7.8-8.0% in the first half of the year; After the Spring Festival, the production of all steel tires by tire companies in Shandong region has increased to around 70%, with fluctuations between 5.2-7.1% in the later period.
The rubber industry may experience a period of consolidation after a high-level decline in the second half of the year
In the second half of the year, with the arrival of the peak period of rubber cutting in domestic and foreign production areas, the supply of natural rubber in China has increased. In addition, there is still a certain amount of port inventory, and it is expected that the pressure on the supply of natural rubber in the second half of the year will increase.
The current inventory of synthetic rubber remains low, and the focus of the supply side in the second half of the year is on equipment construction. In the first half of the year, synthetic rubber maintenance and load reduction were significant. If production gradually resumes in the second half of the year, the supply side of synthetic rubber will significantly increase. In addition, the maintenance and resumption of production of the butadiene raw material in the second half of the year are still in stock. In addition, about 30,000 tons of cargo arrived in Asia in the third quarter, and there are plans to launch new production capacity in the third and fourth quarters. It is expected that the market for butadiene raw material in the second half of the year will not be optimistic, and the cost center of synthetic rubber may shift to a certain extent.
Downstream tires have currently risen to a relatively high level, and it is difficult to see a significant increase in the second half of the year. Downstream tires maintain the necessary support for rubber, but their support for rubber may not be as strong as in the first half of the year.
It is expected that in the second half of 2024, the domestic rubber market will mainly consolidate in the range after a high decline.
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