China’s NBR to rise on cost pressure; gains capped by slow demand

Spot offers for NBR may rise by $50-100/tonne in March in anticipation of reduced supply from plant shutdowns and higher feedstock costs, market sources said.

“We anticipate a price hike of $50-100/tonne for March shipments due to the raw material increase and tighter supply,” an Asian NBR maker said.

On 28 February, NBR spot prices were stable week-on-week at $1,950-2,050/tonne CIF (cost, freight and insurance) China, ICIS data showed.

However, the expected price hikes may be tempered by lukewarm demand amid a slowdown in China, the world's second-top economy after the US.

“Demand is slow, and there is still supply, we have to wait and see,” a Chinese trader said.

China's official manufacturing purchasing managers’ index (PMI) declined by 0.3 points from January to 49.2 in February, the lowest since March 2016, the National Bureau of Statistics (NBS) said on Thursday, 28 February.

But on the other hand, Caixin’s general manufacturing purchasing managers’ index (PMI) for China picked up to a three-month high of 49.9 in February from 48.3 in January, pointing to an easing of contraction in business activity.

Meanwhile, the price of feedstock acrylonitrile (ACN) had increased by $50/tonne during the week ended 22 February to $1,575/tonne CFR (cost and freight) northeast (NE) Asia, according to ICIS data.

The feedstock ACN price had risen by more than 5% since 1 February.

The other key feedstock butadiene (BD) had risen at a more modest pace, registering a gain of $25/tonne since 1 February to $1,125/tonne CFR NE Asia on 22 February, ICIS data showed.

Another factor seen bolstering NBR prices is the output loss from regional producers due to scheduled plant shutdowns in March-April.

China’s Lanzhou Petrochemical will shut both its NBR units totaling 65,000 tonnes/year in April for about 50-60 days for maintenance while South Korea’s LG Chem will shut its 50,000 tonne/year NBR unit in Daesan in March for a 20-day maintenance.

NBR is used in a wide range of applications including the automotive, industrial and agricultural sectors.

China is the world’s largest automotive market and declining vehicle sales and production, had no doubt weighed on demand for NBR.

The Chinese vehicle market remained in freefall in January. Sales in the month slumped 15.76% year on year and were down 11.05% month on month at 2.37m units, data from the China Association of Automobile Manufacturers (CAAM) showed.

January passenger car sales was 2.02m units, 17.71% less than the same month in 2018 and 9.49% less than December.

In 2018, China saw a 2.76% drop in vehicles sales, the first decline in 28 years.