Sharp Decline in Chinese Butyl Rubber Market Despite Automotive Industry Recovery: Factors and Projections

Shanghai, China: The Chinese Butyl Rubber market experienced a significant decline in May 2023, with prices dropping by 23.6% during the month. This price decrease occurred despite notable recoveries in the downstream automotive industry's market performance and industrial output. Market experts suggest that the fall in Butyl Rubber prices can be attributed to the decreasing market value of feedstock Isobutylene and Isoprene throughout the month. Additionally, the Chinese Purchasing Manager's Index (PMI) and reduced crude oil consumption in May contributed to the decline in Butyl Rubber prices.

May 2023 witnessed ongoing declines in China's industrial sector, raising concerns about a further decrease in oil consumption in the world's second-largest economy. Weak Chinese data and doubts surrounding the US debt ceiling agreement also played a role in lowering oil prices, thus impacting the upstream cost of Butyl Rubber and ultimately leading to its devaluation. China's official manufacturing PMI for May reached a five-month low of 48.8, indicating a contraction.

In the last week of May, the price of Brent crude remained stable as the market awaited the decision of OPEC and its allies (OPEC+) regarding production, which is scheduled to be announced on June 4. The oil prices during that week were supported by warnings from the Saudi Arabian energy minister against short selling of oil. However, concerns over broader macroeconomic conditions, uncertainty surrounding the US debt ceiling agreement, and the possibility of further interest rate hikes in the US weighed on market sentiment. Since oil prices were predominantly declining or stagnant in the Chinese market, the manufacturing cost of Butyl Rubber remained low, further contributing to its price drop.

According to ChemAnalyst's projections, Butyl Rubber prices are expected to continue falling in June, although the extent of the decrease is anticipated to be less pronounced. The Butyl Rubber market is expected to recover in the third quarter of the year due to increased demand from the growing Electric Vehicle (EV) industry.