Q1 SBS Market Fell After Rising, and to be Affected by Cost in Long Term
Snapshot: In Q1, China’s SBS market price rose first and then fell, strongly affected by the cost. The SBS supply increased but the demand shrank in the market, leading to an imbalanced supply-demand relationship. The gross profit at producers remained low for a long term, which was affected by the butadiene price trend.
In Q1, China’s SBS market price rose first and then fell. Under the imbalanced supply-demand relationship, the SBS price was dominated by the cost. In December 2022, the SBS price bottomed out. The market price of Baling 791H fell to RMB 11,500/mt and then rebounded. The butadiene price surged. From December 2022 to late February 2023, the EXW price of butadiene at Sinopec increased by RMB 3,500/mt in total, bolstering the cost of SBS. For example, the market price of 791H rose to RMB 13,000/mt in February 2023, but it began to fluctuate downwards at the beginning of March due to the decline in the butadiene price.
As seen from the main drivers, the SBS price was strongly affected by the butadiene price in Q1.
The SBS price was strongly affected by the feedstock butadiene price. In Q1, the gross profit at producers plunged. The average profit at SBS enterprises was only RMB 766/mt in Q1, 2023, down RMB 1,230/mt from Q4, 2022. With the decline in gross profit and fiercer industrial competition, SBS producers operated according to the butadiene market trend. As the Asian butadiene units were expected to take maintenance intensively in Q2, the butadiene market changed ahead of time. Especially in the first half of Q1, the increment in the butadiene price was beyond expectations.
In Q1, the SBS supply moved up notably in the market.
According to SCI, China’s SBS output in Q1, 2023 was 237kt, up 19kt or 8.7% Y-O-Y. From the perspective of production, on the one hand, the supply of major additives recovered, leading to a decline in the unexpected shutdown. On the other hand, there was less scheduled maintenance of SBS units Y-O-Y. Meanwhile, the import volume increased notably, weighing on China’s market. In Q1, 2023, China’s SBS import volume totaled 13,958mt, up 78.1% Y-O-Y. Affected by the sliding consumption and geopolitical factors, the overseas market increased the SBS exports to China. The SBS resources from a certain country in Europe totaled 8,254mt, while those were scarce in the same period of 2022.
The demand underperformed, and the downstream operating rate was poor.
In Q1, the operating rate of the modified bitumen industry and the modified bitumen waterproof roll industry both climbed somewhat, but it was still at a low level. In Q1, the project capital was issued slowly. The liability became obvious as the local city investment came due, affecting the construction of highways. Thus, the rigid demand was curbed. The shoe material industry was sluggish due to the foreign trade situation. The recovery in demand was below expectation.
In Q2, the butadiene units may take overhauls intensively, and major SBS units are expected to be shut for turnaround, driving up the SBS price. In June, as some downstream units may further take maintenance and some new butadiene resources may flow into the market, the supply gap of butadiene is likely to narrow. The negotiation of the contract in July will possibly affect the butadiene market price in June. It is projected that the SBS price may inch down influenced by the butadiene price trend.
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