China Oil-Extended SBS Profit Went Up

China Oil-Extended SBS Profit Went Up

2014-2019 (January to Mid-April) F875 Profit Statistics

From January to mid-April 2019, the theoretical profits of oil-extended SBS F875 averaged RMB 605/mt. As the demand for oil-extended SBS underperformed, market participants might pay less attention to the market. However, in recent months, the feedstock butadiene prices kept decreasing, which provided certain profit space to oil-extended SBS producers.

Heading into April, Sinopec and PetroChina raised the offers, and oil-extended SBS prices rose due to the insufficient resources. Therein, the price of F875 at Sinopec South China Marketing Company increased by RMB 200/mt to RMB 11,400/mt. The price of F875 at the marketing company of PetroChina increased by RMB 100-200/mt. Butadiene and styrene prices at major producers fluctuated in the range of RMB 8,000-8,300/mt. The butadiene ex-works prices at several private producers were low. As the cost hovered at lows, SBS profits at producers continued to rise. Up to April 19, the theoretical profit of F875 was RMB 1,266/mt, up 38.65% from early April. However, market participants showed weak interest in the price increase, so the price increment at trades was limited. Moreover, the VAT adjustment in April exerted limited influences on SBS circulation. Thus, it was hard to say that the profit was positive.

The oil-extended SBS market may run steadily later. Synthetic rubber offers go up, but this will provide limited support to the SBS market, as the dealing prices may be lower than ex-works prices. Moreover, the relatively high prices of mainstream oil-extended SBS grades may have difficulty to improve the tepid market. Besides, the feedstock butadiene prices decrease. In particular, those at private producers in northern China drop greatly. Thus, market participants hold the stronger wait-and-see sentiment. As a result, the oil-extended SBS market may run steadily before end-April. The prices at resource holders may move sideways.

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