Over the past three days, China's butadiene rubber (BR) futures prices rebounded sharply after a correction. On January 23, prices surged strongly on heavy volume, breaking through previous highs with a cumulative gain of CNY1,500 per ton. This rally also propelled natural rubber and 20-grade rubber futures prices higher. Key drivers include accelerating cost pressures and growing expectations of countering market saturation. However, the fundamentals of butadiene rubber itself remain neutral, with the primary concerns still being capacity expansion and inventory pressure.

(1) Upstream Cost Pressure Accelerates

The previous downtrend in butadiene and synthetic rubber prices stabilized around mid-November 2025, initiating a new upward cycle by late November. December witnessed a significant rebound, largely recouping losses from September to mid-November. Specifically:

- CFR China butadiene prices rose 17.7% Qilu Petrochemical's ex-factory price for butadiene rubber BR9000 increased by 10.6%, and the futures price for butadiene rubber BR rose by 10.6%. However, Brent crude oil futures prices declined by 2.3%.

From January 1 to 22, 2026, CFR China butadiene prices climbed a further 24.3%, BR rubber futures rose 6.5%, Qilu Petrochemical's BR9000 ex-factory price increased 4.4%, and Brent crude futures gained 5.7%. This indicates that the synthetic rubber market is significantly influenced by its raw material, butane, while showing minimal sensitivity to crude oil at the upstream end of the supply chain. The market is primarily undergoing a continuous recovery process from its previous sharp decline.

(II) Persistent Supply Pressure in the Spot Market

In 2025, China's butadiene and synthetic rubber production capacity and output both reached record highs, with the industry remaining in an expansion phase for the coming years. Currently, China's butadiene and synthetic rubber plant operating rates remain at elevated levels, with persistent supply pressure in the spot market. According to statistics from Zhuochuang Information, as of January 22, 2026, China's butadiene plant operating rate gradually rose to 68.9%, reaching a mid-to-high level for the same period historically, yet significantly below the 71.3% recorded during the same period in 2025. The weekly operating rate of China's butadiene rubber plants has remained around 75.8%, a historically high level for this period, notably exceeding the approximately 65.7% recorded during the same period in 2025.

Currently, maintenance activities at domestic butadiene rubber plants are minimal, with only Maoming Petrochemical and Xinjiang Dushanzi Petrochemical undergoing shutdowns. Moreover, Maoming Petrochemical's maintenance unit is poised to restart soon. Consequently, domestic butadiene and synthetic rubber supply pressures are expected to intensify further.

(3) Downstream Tire Demand Remains Uncertain

The domestic tire market is showing signs of divergence, with the steel-cord tire segment potentially weakening while the semi-steel tire segment strengthens. This shift primarily reflects slowing domestic demand coupled with continued recovery in overseas markets. Statistics indicate that on January 22, 2026, China's all-steel tire operating rate slightly decreased to 62.4%, while the semi-steel tire operating rate continued to rise to 74.9%. Both figures are significantly higher than the 42% and 70.3% recorded during the same period in 2025. This discrepancy is primarily because the Chinese New Year fell approximately one month later this year, whereas in 2025, production had already begun winding down for the holiday season by this time.

Currently, domestic tire manufacturers face mounting production pressures. While upstream raw material costs have risen significantly, terminal market sales show no signs of improvement. Finished goods inventory continues to accumulate, preventing smooth cost pass-through from upstream suppliers to downstream customers.

(IV) Spot Inventories Remain Elevated with Volatility

Currently, China's butadiene and synthetic rubber inventories are at historically high levels for this time of year, with recent significant fluctuations and diverging trends between the two. According to statistics from Zhuochuang Information, China's port butadiene inventory stood at approximately 34,500 metric tons last week, marking a 22.6% weekly decrease but a 5.1% year-on-year increase. China's social inventory of CR20 rubber stood at approximately 15,600 tons, up 6.8% week-on-week and 24.5% year-on-year.

Concurrently, China's natural rubber port inventories continue to rise. According to data, as of January 26, 2026, total natural rubber inventories in Qingdao gradually increased to around 585,000 tons, up 2.9% week-on-week and 46.3% year-on-year. This indicates that due to weaker-than-expected downstream demand coupled with substantial production and imports, the rubber spot market faces significant inventory pressure.

(V) Anti-Involution and Strong Expectations

The impact of “anti-involution” policies is gradually intensifying. In 2025, efforts to promote industry self-regulation and capacity consolidation in sectors like photovoltaics and automobiles gained momentum. The state strengthened legal frameworks and oversight by revising the Anti-Unfair Competition Law and the Price Law. The China Association of Automobile Manufacturers and the China Rubber Industry Association strongly urge the automotive, tire, and related industries to implement “anti-internal competition” policies. On June 23, 2025, the “Notice on Conducting a Comprehensive Assessment of Aging Petrochemical and Chemical Facilities” mandated a thorough evaluation of all petrochemical and chemical facilities that had reached their design service life or operated for over 20 years as of May 30, 2025. On September 2, 2025, the “Work Plan for Stabilizing Growth in the Petrochemical Industry (2025-2026)” mandated the implementation of upgrades for outdated facilities.

Data indicates that in 2025, China's butadiene industry had a cumulative capacity of 635,000 tons from facilities in operation for over 20 years, accounting for 9% of total capacity. In China's butadiene rubber sector, facilities with over 20 years of service account for 310,000 tons of capacity, representing 14.7% of total production. Within the styrene-butadiene rubber industry, facilities operational for over 20 years collectively hold 290,000 tons of capacity, constituting 15.5% of total output.

As China's “anti-internalization” policy continues to deepen, it significantly impacts energy and chemical sectors like butadiene and synthetic rubber. The pace of phasing out outdated capacity may accelerate markedly in the future, while new capacity expansion could gradually slow down. The impact of “anti-internalization” has already manifested in certain futures products in 2025, and its potential influence on energy and chemical products like synthetic rubber must be closely monitored in 2026.

Overall, China's butadiene fundamentals currently appear robust while synthetic rubber fundamentals remain moderate. Cost-driven pressures are intensifying, particularly as rising international butadiene prices drive domestic and downstream synthetic rubber costs upward. This trend is compounded by spreading optimism in financial markets, especially as the impact of “anti-involution” policies and their expectations continues to expand across chemical commodities. Furthermore, China is expected to maintain accommodative monetary policy and proactive fiscal policy in 2026. The Federal Reserve is anticipated to accelerate its pace of interest rate cuts, while the RMB exchange rate against the USD continues to strengthen. Given butadiene's historical volatility, investors should maintain a degree of caution amid market sentiment and closely monitor shifts in fundamentals.

As an integrated internet platform providing benchmark prices, on January 26th, the benchmark price of styrene-butadiene rubber (SBR) according to SunSirs.com was 12175.00RMB/ton, an increase of 5.18% compared to the beginning of the month (11575.00 RMB/ton).

Application of SunSirs Benchmark Pricing：

Traders can price spot and contract transactions based on the pricing principle of agreed markup and pricing formula (Transaction price=SunSirs price + Markup).

If you have any questions, please feel free to contact SunSirs with support@SunSirs.com