SBS Prices to Warm Up in Q1, 2024
Snapshot: China’s SBS market prices mainly fluctuated downwards in Q4 of 2023 but rebounded in end-Q4. In Q1, 2024, the feedstock butadiene price is expected to fluctuate upwards, and the SBS supply may remain tight, while the demand is likely to recover slowly. Thus, the SBS market prices are predicted to warm up.
The SBS market prices mainly fluctuated downwards in Q4 of 2023 but rebounded in end-Q4.
In Q4, 2023, the SBS market prices mainly fluctuated downwards but rebounded at the end of the quarter. For example, the quarterly lowest price of Jiangsu 792E was RMB 11,350/mt in mid-December, while the quarterly highest price was RMB 12,825/mt in early October, with a price spread of RMB 1,475/mt. From October to mid-December 2023, the SBS prices fluctuated downwards. The reasons for the fall were as follows. First, the market price of major feedstock butadiene swung down from mid- and late November, weakening the support for the SBS market. Second, the downstream demand constantly weakened, dragging down the SBS market price. In late December, some butadiene units were shut down unexpectedly, rendering a rise in the butadiene price. The SBS prices edged up bolstered by the rise in the butadiene price. Yet, due to the dull downstream demand, the increment was minor and short-lasting. As of December 29, 2023, the market price of Jiangsu 792E closed at RMB 12,100/mt, down around 5.84% from end-Q3.
In Q4, 2023, the SBS market prices fluctuated downwards, mainly as downstream demand weakened, but they rebounded in end-Q4 bolstered by cost and supply.
The SBS market prices kept falling as downstream demand weakened.
Under the background of weakening demand in Q4, 2023, the SBS market prices trended at lows and hovered around the cost line for a long term. Only in October, the operating rate at the SBS modified bitumen plants was relatively high. In November and December, the SBS modified bitumen plants suspended production in succession, especially those in northern regions. Up to December, the operating rate was around 42%. Affected by the seasonality, the waterproof roll enterprises in northern regions stopped production in succession in Q4 of 2023, leading to a notable fall in the rigid demand for SBS. In southern regions, orders decreased and the overall demand was tepid. Affected by the export environment, the operating rate at shoe material plants was relatively low, and shoe material plants purchased SBS on rigid demand.
Supported by cost and supply, the SBS market prices rebounded in end-Q4, 2023
In late December, due to the unexpected butadiene unit changes at BASF-YPC, Sinopec Qilu Company, and Liaoning Bora Petrochemical, the butadiene market price surged. Thus, the SBS market prices rose accordingly. Meanwhile, the profits at SBS producers hovered at lows and were negative most of the time. Pressured by cost, many SBS producers cut production or shut units for maintenance. Particularly, some private producers shut their units for a long time. The influence of unit shutdowns in October and November was revealed in December. In December, the social inventory was relatively low. According to SCI, the SBS social inventory decreased by 9.7% M-O-M in December. The cost and supply jointly bolstered the rebound in the SBS prices in end-Q4 of 2023.
In Q1, 2024, with the supply-demand imbalance getting severer, cost is expected to be the main factor affecting the SBS price fluctuations. SCI reckons that the SBS market may warm up in Q1 of 2024, but the increment may be minor.
The feedstock butadiene price is predicted to fluctuate upwards, strongly bolstering the SBS market from the cost side.
With the expansion of China’s SBS capacity and the increase in the imported resources, it is projected that the profits at SBS producers may further decline with China’s SBS market competition intensifying. Thus, the feedstock butadiene price will possibly have a direct influence on the SBS future market. In Q1, 2024, China’s butadiene market price is expected to swing up. The main reasons were as follows. It was heard that the negotiated volume of deep-sea cargos was limited, and some butadiene units are scheduled to take maintenance in March 2024, causing a relatively tight supply of butadiene, so the butadiene price may hover at highs. The high butadiene price may strongly bolster the SBS market.
The SBS supply may remain tight, while the demand is likely to recover slowly.
In Q1, 2024, the SBS supply will possibly remain tight. Around the Spring Festival holiday, the operating rate of most producers may be low, so the supply volume is likely to be at a low level. In March, with the resumption of the downstream operating rate, SBS producers may restart their units. Yet, curbed by the cost pressure, the increment in the operating rate may be limited. As for demand, most downstream enterprises are expected to suspend production around the Spring Festival holiday, so new orders may be sparse. In March, downstream enterprises are likely to gradually resume production, so dealings of new orders may improve somewhat. Therefore, the demand may recover slowly in Q1, 2024, underpinning the SBS market limitedly.
To conclude, in Q1 of 2024, the feedstock butadiene price is expected to fluctuate upwards, and the supply may remain tight. Bolstered by cost and supply, the SBS market price is likely to warm up. Yet, curbed by weak demand, the increment may be limited.
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