May China SBS Unit Operating Rate Rose
Introduction: In May, the operating rate of China’s SBS industry was 45.43%, up 8.42% M-O-M. With the end of some major units’ maintenance, the market supply increased somewhat. However, under cost pressure, major SBS units underwent unscheduled maintenance, and private SBS producers kept their operating rates at lows.
Fourteen SBS producers were investigated, including 4 state-owned enterprises, 1 Taiwanese-funded enterprise, 3 joint ventures, and 6 private enterprises, with the total capacity of 1,600kt/a. The samples cover 100%.
Increment in May SBS operating rate was lower than expected.
In May, the operating rate of China’s SBS industry was 45.43%, up 8.42% from a month ago. Sinopec Baling Company resumed normal production, and the market supply significantly rose from April. Huizhou LCY Elastomers increased its operating rate in May. The two companies’ production resumption led to an increase in the monthly operating rate, but the increment was lower than expected. The decrease in SBS producers’ marginal benefit became the main reason for curbing the operating rate increase.
However, butadiene and styrene prices significantly went up in May, causing an increase in SBS costs. Taking butadiene at Sinopec as an example, the butadiene price was raised by RMB 1,900/mt in May, while dry SBS prices first went down and then rose. Although dry SBS prices rebounded in the second half of May, the increment in SBS prices was greatly lower than that in butadiene prices, causing a decrease in SBS producers’ marginal benefit. Consequently, Fujian Gulei Petrochemical shut two production lines down on May 15. In terms of private producers, only some production lines at Shandong Huayu Rubber and Ningbo Changhong Polymer Scientific and Technical were under production, so the overall operating rate was not high.
In addition, PetroChina Dushanzi Petrochemical axed SBS production, as its upstream styrene unit underwent maintenance, causing a certain supply gap of feedstock. It shut its oil-extended SBS production line down on May 17 and restarted the production line until May 30.
Influence of anticipated SBS production change in June on the market
According to the planned production arrangement issued by SBS producers, their operating rates are predicted to notably rise in June, but variables also exist. The production arrangement at Sinopec Baling Company, PetroChina Dushanzi Petrochemical and Huizhou LCY Elastomers is relatively normal. Ningbo Jinhai Chenguang Chemical and Zhejiang Zhongli Synthetic Material Technology plan to restart SBS units. Shandong Huayu Rubber resumed two SBS production lines to operate at the end of May, and the operating rate at private SBS producers rose.
Nevertheless, SBS producers are under high cost pressure. Since some SBS producers are already on the verge of loss, the marginal benefit affects the actual SBS production. Therefore, the planned output at SBS producers is not very instructive. Currently, the SBS social inventory is low, and major suppliers are not under heavy sales pressure. The restart of SBS units at private producers is, on the one hand, for the delivery of earlier pre-sale orders, and on the other hand, is for replenishment before later maintenance, which is predicted to exert limited influences on the market resource circulation.
SCI predicts that SBS suppliers will raise prices under cost pressure, and SBS market prices will probably remain in an uptrend in the short term. The cost side will probably become the main factor affecting the SBS price trend, and the influence of supply on the June SBS market is predicted to weaken somewhat. In June, close attention should be paid to changes in feedstock prices.
All information provided by SCI is for reference only, which shall not be reproduced without permission.
Please click "Read more" for the full article.
