In early April, ExxonMobil announced the closure of its petrochemical facilities at NDG in France, which included both C5 and waterwhite (HHCR) tackifier production units. This followed on the heels of Arakawa’s shutdown of its HHCR unit in Germany in 2023. In February, Resin Solutions had announced the shutdown of its C5 tackifying resin unit in Texas. Meanwhile in China, new production units continue to be built, increasing China’s dominance in the tackifier space. What does this mean for the industry going forward? We’ll look at what has happened previously to get us to this situation and what could potentially happen in the next decade. 

Much like the rest of the olefins and related markets, China’s continuing expansion into the tackifier markets has cemented the country’s place as the leading manufacturer of hydrocarbon tackifying resins in the world. In 2023, Argus reported that China produced over half of the total global supply of hydrocarbon tackifiers (1242.2kt across all HCR grades), with significant capacity coming online over the next several years. 

The presence of Chinese tackifier producers has been growing over the last two decades. From a very small base of 15 production units in 2005, growing to 65 sites by 2023; this marked a total increase in production capacity of 1607kt. Until recently, producers had focused their expansion efforts on cheaper, lower quality C5 and C9 tackifiers, which allowed established producers to maintain a higher market share of higher quality hydrocarbon resins, especially waterwhite tackifiers (HHCR). In 2015, China had three HHCR production units across the country, with a combined capacity of only 36.6kt. By the end of 2023, there were 17 units capable of producing 650kt of HHCR each year which, if running at 100pc operating rate, could have accounted for 87pc of total global demand. Obviously running all units at 100pc operating rates is not realistic or feasible. Instead, Argus sees Chinese HHCR operating rates hovering around 60pc on average as the market is currently severely oversupplied. Older, less profitable units are typically idled for long periods of time while newer units run with higher rates. We expect this net length to remain for the remainder of the decade. The length in the market is keeping margins thinner. Aggressive pricing strategies from producers looking for market share have pressured other producers to cut prices to maintain a foothold in the market. HHCR prices had historically been at a substantial premium to adhesive quality C5 HCR prices, however recently the difference in pricing has been more minimal, sometimes even reversed, with C5 resins in some instances more expensive. 

The HHCR market will only rebalance when demand finally catches up with available supply, and this process could be sped up with some capacity rationalisation. In China, there are a number of units producing zero or minimal volumes which could be potential candidates for such rationalisation. However, these capacity losses would be more than offset by new units that are still being built in China by companies like Henghe, Jinhai and Luhua. Within Europe, there are few operating units left, so any closures would significantly impact local supply. However, with the ever-increasing pressure from Chinese producers weighing on prices and in turn margins, European producers will have to accept lower margins to compete or produce more specialized grades of tackifiers suited for local demand that can’t be as easily displaced by imports from other regions. 

Author Simon Sheppard, Chemicals Analyst