Will Butadiene, SBR and PBR Price Increases Continue

SCI99

2019-12-19

Will Butadiene, SBR and PBR Price Increases Continue

After National Day holiday, the butadiene and synthetic rubber prices began to drop from a high level. Considering sluggish supply and demand fundamentals, most traders adopted a bearish sentiment to the market. However, butadiene, SBR and PBR markets remained in an uptrend beyond expectations. What are key drivers to boost the market? How will butadiene, SBR and PBR markets go in the future? The detailed analysis is as follows.

Butadiene market: Unexpected units’ shutdown mainly drove up China’s butadiene market. In domestic market, the butadiene units at Shenhua Ningxia Coal Industry and PetroChina Fushun Petrochemical were shut down accidentally, resulting in the tight spot supply in northern market. Traders were reluctant to sell at lows as the operating rate of downstream industries was relatively stable. Thus, the butadiene market price moved up. In foreign market, in late November, the butadiene unit at TPC Group in the U.S. was hit by the explosion, driving up the import price somewhat. Thus, there were limited low-priced butadiene resources in the market. Some downstream industries stocked up ahead of the New Year’s Day holiday. Besides, the import price of butadiene was still lower than domestic market price. The price spread between butadiene and synthetic rubber was obvious. Bolstered by high operating rate of synthetic rubber industry and passable demand for imported resources, the negotiable butadiene price went higher somewhat. By December 6, the butadiene market price in East China hovered within RMB 9,700-9,900/mt, up 13.95% Y-O-Y.

Synthetic rubber market: Except the cost support from the butadiene price increase, the synthetic rubber market remained in an uptrend due to the support from the NR futures price at the SHFE and suppliers’ policy. After October, the NR futures price at the SHFE rebounded strongly. In November, the investors’ capital flowed into the market and promoted the rubber price to surge. Boosted by that, the synthetic rubber market surged, driving up traders’ sentiment. Meanwhile, mainstream sales companies controlled the orders, and new resources were sparse in the market. The spot inventory at readers was low, and the replenishment cost was high. Thus, they were reluctant to sell at lows. Based on above factors, the synthetic rubber market trended up. By December 6, the self-delivery price of synthetic rubber in Shandong hovered within RMB 11,400-11,500/mt.

SCI forecast:

Butadiene market: China’s butadiene market will move down in the coming days. However, the whole downward extent of price will be limited. For the time being, the operating rate of synthetic rubber industry is high, so the rigid demand will lend certain support to the market. Besides, downstream units are not planned to take maintenance in the short run. The stable demand will bolster China’s butadiene market. As seen from the supply, in December, imported butadiene resources will arrive at East China port. Besides, China’s butadiene units will not take maintenance. Thus, the supply will be sufficient. Yet, China’s newly added butadiene capacity has not been released fully. In late January, due to the Spring Festival holiday, downstream users will stock up ahead of time, lending certain support to the market. Overall, China’s butadiene market will fluctuate downwards before the Spring Festival holiday.

Synthetic rubber: The SBR and PBR markets trended down successively after surging. In December, China’s synthetic rubber market will be strong. Natural rubber will enter rubber taping halt period and inventory replenishment cycle. Thus, the whole supply will be tight. Besides, boosted by the market capital, the natural rubber market will trend up. As for the feedstock butadiene, bolstered by the rigid demand, the downward extent of butadiene price will be limited ahead of the Spring Festival holiday. Considering the sufficient supply, the butadiene price will hardly increase. As for the end demand, affected by the haze weather, the operating rate at tire enterprises will drop. In November, the tire enterprises enter into the holiday mode in succession, weakening the demand for SBR and PBR. Overall, SCI predicts that China’s synthetic rubber market will trend down after climbing ahead of the Spring Festival holiday.

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