China PBR Market Trended Sideways After Falling
Snapshot: Recently, China’s PBR market price halted its fall beyond players’ expectations, and it trended at lows or even inched up. The main drivers behind the price change were analyzed as follows.
In December, the PBR market price trended flat. According to SCI, on December 12, the closing price of HCBR 9000 in North China was RMB 10,200/mt, down 1.92% from late November. Overall, the market price of HCBR 9000 stayed at a yearly low, but the decrement in it was halted temporarily.
Cost: The import price of butadiene trended flat, failing to bolster the domestic price. China’s butadiene enterprises sold resources normally. The traders in East China were reluctant to sell butadiene at lows bolstered by cost, some offers for butadiene kept high. There was no product available from the new butadiene unit. The downstream enterprises purchased butadiene on a need-to basis amid normal operating rate. The negotiation in the market was slack. In early December, Sinopec Yangzi Petrochemical shut down one butadiene unit briefly, slightly bolstering the market. Players kept wait-and-see sentiment. China’s butadiene market trended flat. The average price of butadiene edged up in December. Strongly bolstered by cost, the gross profit of PBR production was squeezed.
Related products: In H1 December, the price of Shanghai natural rubber futures went up, driving up the spot price of natural rubber. The external macro atmosphere improved, promoting the demand in the market. But as for the fundamentals, the rubber tapping work was fully halted in the production area of Yunnan. The plants mainly processed cup lump. The overall inventory of non-standard rubber was sufficient. Thus, the price of SCR10# was at a low level. The field latex was released limitedly in Hainan due to the rainfalls and low temperature. Yet, although the field latex output was affected by rainfalls, the overall overseas supply was ample amid the production peak season. As for China’s demand, the downstream enterprises showed thin appetites for purchasing on rigid demand. Only some traders purchased natural rubber for arbitrage. Dealings were mainly for Vietnamese natural rubber, while the trading atmosphere for delivered SCRWF was tepid. As for SBR, traders showed more interest in replenishment on rigid demand. Thus, the SBR market price edged up. The PBR market was bolstered by fairish markets of related products.
Supply: In December, the PBR units at YPC-GPRO (Nanjing) Rubber, PetroChina Jinzhou Petrochemical and Hipro New Material Technology remained offline. Zhenhua New Materials (Dongying) restarted its PBR unit. Hipro New Material Technology may restart its PBR unit in the short term. Besides, there were products available from a 100kt/a PBR unit at Shandong Yihua Rubber & Plastic Technology. The 100kt/a PBR unit at Zhejiang Petroleum & Chemical will have a trial production. The surplus supply for PBR dragged down the market.
Demand: Up to December 8, the operating rate at all-steel tire enterprises in Shandong was 60.01%, down 0.17% W-O-W and 4.28% Y-O-Y. According to SCI, the operating rate at tire enterprises in Shandong changed slightly this week. First, some tire enterprises were inclined to stockpile and their tire capacity was released steadily. Second, several tire enterprises cutting production last week resumed normal production this week. Third, some tire enterprises cut daily production slightly, dragged down by the slow sales. Overall, the tire inventory increased. So most tire enterprises were cautious about adjusting the operating rate. Although the tire units ran steadily, the imbalance between production and sales may be severer with inventory replenished and constant sales slack season. And the stable operating rate may not stay long. It is projected that some tire enterprises with quick stockpiling may cut daily production and the overall operating rate of tire units will possibly move down marginally next week. The tepid demand is expected to drag down the price of PBR in the coming days.
Overall, there were no improvement on the fundamentals of PBR. The PBR price halted its fall, bolstered by the cost and rising natural rubber market. In the coming days, new butadiene units may be put into production. The increment in butadiene price is likely to be minor. The price of related products may be range-bound, dragged down by the demand. Favorable factors may hardly be seen on the PBR fundamentals.
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