China SBS Capacity Expands, Causing Further Oversupply
Keywords: SBS, Supply-Demand, Capacity expansion, Downstream, Consumption
Snapshot: In recent years, China’s SBS market has entered the peak season of capacity expansion again. According to SCI, there may be a capacity of 295kt/a to be newly added in total in the next three years, which is expected to have a profound impact on the supply-demand relationship and the industrial pattern of China’s future SBS market.
In recent years, China’s new SBS capacity has gone into production in succession.
From 2019 to 2023, China’s SBS industry has ushered in the peak season of capacity expansion. In the past five years, the SBS capacity has grown at an average annual rate of 9.29%. It is projected that China’s total SBS capacity may reach 1,770kt by the end of 2023, up 10.63%Y-O-Y. Therein, the newly added capacity is expected to reach 170kt/a. Although some new units are postponed coming stream with the profit of the SBS industry shrinking and the market competition getting intensified, the units approved in the early stage are highly likely to go into production. Particularly, the downstream SBS supporting facilities of related integrated ethylene projects may come online in succession. Besides, China’s major SBS suppliers focus on export business, so they strengthen the SBS capacity layout in coastal regions, which may continue to promote the increase in China’s SBS capacity.
In the next three years, China’s SBS industry may enter the peak season of capacity expansion again.
According to SCI, China’s newly added SBS capacity is estimated to be 295kt/a, which may mainly come online from 2024 to 2026. The construction of downstream facilities of related integrated ethylene projects may accelerate, and leading SBS producers are likely to accelerate the arrangement of exports. Thus, China’s SBS market may enter the peak season of capacity expansion again, aggravating the surplus of China’s SBS capacity. It is expected to affect the SBS market trend in the future.
The SBS imports increased, aggravating the oversupply of SBS in the future.
In 2023, China’s SBS imports were more concentrated as seen from trade partners. The imports from a certain European country ramped up. From January to September, it reached around 40kt, accounting for 74% of the total imports. The international situation led to a change in the trade flow of the SBS resources in a certain European country. China is the largest consumer of SBS in the globe, attracting more SBS resources of a certain European country, which further aggravates the oversupply of SBS in China’s market. In 2023, China’s SBS imports are expected to be around 72kt, up around 179% Y-O-Y. In the medium and long term, the trade flow caused by the international situation may hardly change, and China’s SBS imports are expected to remain high. China’s SBS imports may see a large increment in 2023 and trend at highs in the future, dragging down the SBS prices.
The growth in the downstream demand is expected to slow down, highlighting the oversupply in the market.
It is predicted that the downstream consumption of SBS may edge up in 2023, reaching around 900kt, up 5.88% Y-O-Y. However, the export environment of traditional manufacturing industries weakens, and the macro fund environment weighs on the infrastructure. Thus, the growth rate slows down. As the total supply is expected to rise notably, the oversupply may be more obvious.
In terms of the three major downstream industries of SBS, the road bitumen modification industry is expected to remain rising, but the growth may slow down. From January to September 2023, China’s real estate market was relatively weak, and the new construction starts fell by 23.4%, weighing on the waterproof roll industry. It is predicted that the consumption of SBS may decline in 2023. As for the shoe material industry, China’s overall export environment was tepid, especially affecting the proportion of shoe exports in H2, 2023. Yet, domestic orders recovered somewhat. It is projected that the consumption of SBS in the shoe material industry is likely to edge up.
The new capacity expansion is expected to weigh on the future SBS market, affecting the changes in the SBS inventory cycle.
The new SBS capacity expansion may have a series of impacts on the SBS market. The previous favorable market environment led to the rapid release of SBS capacity. However, the expected growth rate of supply is far higher than that of demand, which may further aggravate the oversupply in the coming days. As seen from the latest price trends of commodities, the price change of SBS lagged behind that of other products. Besides, SBS are end products of the oil industry chain, so the cost faces high pressure in transferring to the downstream affected by the weak fundamentals. The inventory is expected to pile up, triggering players’ speculations about the SBS inventory cycle. From the perspective of downstream industries, the growth in the demand from downstream industries is likely to slow down. In the future, SBS’s passive destocking cycle may be advanced.
All information provided by SCI is for reference only, which shall not be reproduced without permission.
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