SunSirs: The Fundamentals of Butadiene Rubber Market in China Is Weak in 2025, the Demand Is Expected to Increase in 2026

In 2025, the price of butadiene rubber showed a trend of first rising and then continuing to decline, with a slight rebound at the end of the year:

From the beginning of the year to early February: Prices rapidly surged, reaching the peak price for the whole year (15,000 RMB/ton).

From early February to the end of October: In early February, the price of BR began a downward trend, and the 10 day, 20 day, and 30 day moving averages also successively crossed the BR price curve at the end of February and early March. The downward trend of BR was established and continued until the end of October. Although there were slight fluctuations during this period, the overall downward rhythm remained unchanged, reaching the lowest point of the year (about 10,450 RMB/ton) at the end of October.

From the end of October to December: Prices began to rebound slightly after hitting bottom.

In 2025, the production capacity of China's BR industry will continue to expand, with increased output and loose supply

By 2025, the total domestic production capacity of BR will reach 1.992 million tons, a year-on-year increase of 11.16%. Yulong Petrochemical's 150,000 ton new production capacity will be put into trial operation at normal load in the first quarter of 2025, while Jilin Petrochemical's 50,000 ton low flow unit will be put into trial operation in mid October 2025. In 2025, the production of BR will be divided into months, with a peak of 143,200 tons in May of the first half of the year and a cumulative production of 1.4 million tons from January to November. It is expected that the annual production will exceed 1.5 million tons, a significant increase from 1.3 million tons in 2024.

In 2025, the price of core raw material butadiene will significantly decrease, and the cost support of BR will collapse

The main reason for the weak price of BR in 2025 is the significant decline in the oversupply price of butadiene, the core raw material of BR (which accounts for 75% -80% of the production cost of BR). In 2025, the newly added production capacity of butadiene (about 980,000 tons) far exceeds the downstream demand increment, and the overall price is declining. According to the monitoring of SunSirs, the price of butadiene will drop from 10,800 RMB/ton at the beginning of the year to 7,733 RMB/ton at the end of the year in 2025, with an overall decrease of 28.40%.

In 2025, the domestic demand for BR will be weak, and the substitution effect will be significant due to the impact of price differences

In 2025, the performance of the downstream tire industry of Shunding rubber is average, and the demand support for Shunding rubber is not satisfactory. The traditional peak season of "Golden September and Silver October" in 2025 has not occurred, and the profits of tire companies have significantly declined. The production capacity utilization rate of semi steel tires has decreased year-on-year throughout the year, and tire companies face significant pressure on finished product inventory. In addition, the utilization rate of production capacity in industries such as rubber conveyor belts and shoe soles has slightly decreased compared to the same period last year. The rubber hose and other industries, driven by construction machinery, have slightly better capacity utilization rates than in 2024. According to data from the National Bureau of Statistics, the cumulative tire production from January to November 2025 was 1,103.115 million, an increase of 0.6% year-on-year; The average production rate of all steel tires in China in 2025 is around 62%, a slight increase from 59% in 2024; The average operating rate of semi steel tires is around 71%, a significant decrease from 78% in 2024.

During the year, the price of BR remained consistently lower than that of natural rubber, with a price difference exceeding 4,000 RMB/ton at one point. This stimulated tire companies to increase the proportion of synthetic rubber used, providing a significant increase in alternative demand.

In 2026, the BR industry will enter the stage of "stable quantity and improved quality"; The price of BR is still mainly affected by costs

In 2026, the new production capacity of China's BR will continue to grow, and the proportion of high value-added varieties will increase. The overall supply of BR will be loose

In 2026, China's BR production capacity will continue to grow, with traditional nickel based BR production still dominating, but the proportion of high value-added varieties such as rare earth BR and lithium based BR production capacity will increase. The proportion of rare earth products is rapidly increasing. The proportion of rare earth based BR production capacity has increased from 15% in 2020 to 28% in 2024, and is expected to exceed 35% by 2026.

Data shows that the domestic production capacity of Shunding rubber may increase by 400.000 tons/year to 2.392 million tons in 2026, among which the 200.000 tons/year low Shunding unit of Zhongzhe Group (Beilun, Ningbo) is planned to be put into operation in early 2026; Dushanzi Petrochemical's 100.000 tons/year rare earth/nickel system switch, planned to be put into operation in 2026; Yanshan Petrochemical's 100.000 tons/year BR plant is planned to be put into operation by the end of 2026 or 2027. Affected by the introduction of new production capacity, the production of BR in China is expected to increase by more than 10% year-on-year in 2026, with an overall relaxed supply situation.

The demand for BR in 2026 will still be dominated by tire demand

By 2026, the demand for tires and automobiles will steadily increase, while the overall demand for BR will remain stable; New energy vehicles drive an increase in the usage of high value-added Shunding varieties

From the perspective of automobile production and sales, it is expected that China's automobile production will reach 26-27 million units by 2026, a year-on-year increase of 4-6%. Among them, the production of new energy vehicles is expected to exceed 18 million units, with a penetration rate of over 45%. The rapid development of new energy vehicles has put forward higher requirements for tire performance: firstly, due to the large weight of batteries, the overall weight of the vehicle has increased, and the requirements for tire load-bearing capacity and wear resistance have been raised; Secondly, the instantaneous torque of the motor is high, requiring tires to have better grip; Thirdly, to extend the range, low rolling resistance tires are required. These requirements have driven the growth in demand for high-performance BR.

From the perspective of tire production structure, it is expected that the production of all steel tires will increase by 3-4% and the production of semi steel tires will increase by 5-6% in 2026. All steel tires are mainly used to support commercial vehicles and construction machinery, supported by infrastructure investment and logistics transportation demand; Half steel tires are mainly used in passenger cars, benefiting from consumer upgrades and the development of new energy vehicles. It is worth noting that the production growth rate of high-performance tires (such as low rolling resistance and high anti-skid tires) is expected to reach 8-10%, significantly higher than the industry average.

Export demand continues to grow in 2026

China's BR exports are undergoing a historic transformation, shifting from net imports to net exports. From January to November 2025, the import volume of BR in China reached 254.000 tons, an increase of 3.25% year-on-year; The export volume of China's BR reached 287.200 tons, a year-on-year increase of 22.21%. It is expected that the net export volume will continue to grow in 2026, and Chinese tire companies will expand their overseas production capacity. Build production bases in Southeast Asia, Africa, Latin America, and other regions. It is expected that by 2030, overseas production bases will contribute 58-62% of the production capacity of domestic tire enterprises, driving an average annual growth rate of 9-11% in demand for BR exports.

In 2026, the tight supply of butadiene and the loose supply of BR will still be mainly affected by costs

As the main raw material of BR, butadiene accounts for 75-85% of the production cost, and its price trend directly determines the bottom line of BR cost. In 2026, the butadiene market will present a pattern of "tight front and loose back".

From the supply side, the supply of butadiene will be tight in the first half of 2026 and loose in the second half. In the first half of 2026, there will be no new butadiene production capacity put into operation. At the same time, the second quarter is the peak maintenance period for refineries in Asia, and the operating rate of ethylene plants is seasonally low, which supports the price of butadiene. In the second half of the year, with the continuous production of butadiene units in integrated refining and petrochemical projects such as Shenghong Refining and Yulong Petrochemical, it is expected that the supply of butadiene will significantly increase in the second half of 2026. Especially after the third quarter, the concentrated release of new production capacity has increased supply pressure. The price of butadiene is expected to show a trend of first rising and then falling in 2026, and the cost of BR will also fluctuate accordingly.

In 2026, the price of BR may experience a wide range of fluctuations from strong to weak

Based on cost analysis and supply and demand pattern, the price of BR is expected to show a strong then weak and inverted V-shaped trend in 2026:

First quarter (January March): Due to equipment maintenance and tight supply, coupled with pre Spring Festival stocking demand, the price is expected to be in the range of 11.500-12.500 RMB/ton.

Second quarter (April June): The rise in butadiene prices has strengthened cost support, and tire companies have entered the peak production season with strong demand. It is expected that the price will rise to 12.500-13.500 RMB/ton, reaching a high point for the year.

Third quarter (July September): New production capacity is gradually put into operation, and supply pressure is evident, leading to a decline in butadiene prices. The price of BR has started to decline and is expected to fluctuate within the range of 13.500-12.500 RMB/ton.

Fourth quarter (October December): The supply-demand relationship further loosens, and prices continue to decline, expected to fall back to 12.500-11.000 RMB/ton, close to the cost line.

Throughout the year, the price of BR will be mainly based on cost pricing, with an expected average price of 11.000-13.500 RMB/ton. This increase is mainly driven by the rising cost of butadiene and the increase in environmental protection costs.

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