Feb SBS Operating Rate Fell Notably as Producers Cut Production Around Spring Festival
Snapshot: The operating rate of China’s SBS industry was 40.5% in February, down 8.49% M-O-M. Affected by the Spring Festival holiday, downstream enterprises suspended production. SBS producers cut production to avoid the pileup risks in the inventory. Thus, the operating rate of the SBS industry decreased notably.
The operating rate of the SBS industry saw a large decline. The demand was tepid during the Spring Festival holiday. Some suppliers worried about the increase in the inventory, so they cut production notably. Therein, Sinopec Hunan Petrochemical (formerly known as Sinopec Baling Company), Huizhou LCY Elastomers and Fujian Gulei Petrochemical axed production. Besides, Sinopec Beijing Yanshan Company and Hainan Baling Chemical New Materials shut down their units in February. Thus, the operating rate of the SBS industry fell significantly.
In February, the profits at SBS producers recovered somewhat but remained low.
The overall profits at SBS producers increased in February. The feedstock butadiene price climbed noticeably in February, Sinopec’s butadiene price in East China increased notably, and the styrene price fluctuated upwards, resulting in a rise in the cost. In February, the monthly average cost increased by around 6.69% M-O-M. According to SCI, the EXW price of Baling dry SBS closed at RMB 13,200/mt, and the market price trended up. The monthly average profit was RMB -93/mt theoretically, up 34.91% M-O-M.
Most SBS producers faced cost pressure. The feedstock butadiene showed a continuous uptrend, strongly affecting the SBS prices. However, the overall profit of the SBS industry still hovered at lows. Most producers still faced losses. Besides, affected by the Spring Festival holiday, there was no support from the demand side. Thus, major producers including Sinopec Hunan Petrochemical and Huizhou LCY Elastomers cut production in succession.
Influence of expected changes in the operating rate on the SBS market in March
In March, the overall operating rate of China’s SBS industry is expected to recover notably. With the influence of the Spring Festival holiday ebbing, the units that were shut down or ran at lower loads before may run at increasing operating rates. Although most SBS producers face losses, there are some marginal benefits at them. In end-February, some major SBS producers released their data of production arrangements. Sinopec Hunan Petrochemical (formerly known as Sinopec Baling Company), Huizhou LCY Elastomers and Fujian Gulei Petrochemical are expected to run their units at higher loads. With the SBS units at Sinopec Beijing Yanshan Company and Hainan Baling Chemical New Materials being restarted, the overall operating rate is likely to rebound significantly. In terms of demand, the overall operating rate of downstream industries may rise slowly, and downstream users are expected to show resistance to high prices. Thus, there may be a strong supply and a weak demand in the market in March. SCI reckons that the SBS market is expected to be still strongly affected by cost. Yet, with the supply-demand imbalance intensifying, there may sparse support from fundamentals. In March, it is expected that there may be no market at high prices.
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