2018: SEBS Market Met the Waterloo

Picture from: stock.tuchong.com

In April, China’s major SEBS plants lowered the EXW prices by RMB 1,500-2,000/mt. The daily price decrease plunged to a new low. Meanwhile, after the Spring Festival, the market performed similarly to that in 2014. Some low-end grades hit the market, which forced down the overall market prices.

The imbalance between supply and demand caused by oversupply was the major reason for the price decline.

Huizhou LCY Elastomers and Sinopec Baling Company put the units into production in 2017, which increased the supply considerably. By the end of 2017, the SEBS capacity surged by 90% from 2016. In 2018, Zhejiang Zhongli Synthetic Rubber and Huizhou LCY Elastomers are expected to put the units into production. Supply pressure will remain high.

The growth of export volume and domestic consumption volume fell behind that of capacity. In 2017, operating rates of some SEBS units were reduced to below 50% for the first time. Subsequently, the contradiction broke out in 2018. According to SCI, SEBS social inventories remained high after the Spring Festival. By the end of March, inventories at major plants totaled 8kt. In the meantime, inventories at traders were also high. Small and medium-sized traders suffered losses.

As a result, EXW prices of SEBS greatly dropped in early April.

The SEBS market will enter a transitional period against the background of oversupply.

China’s SEBS industry will welcome a capacity boom in the next 5 years. Sinopec Baling Company, TSRC (Nantong) Chemical Industrial and Ningbo Jinhai Chenguang Chemical plan to expand SEBS capacity. Demand for SEBS grows stably. Although the export volume is expected to go up rapidly, it will be hard to balance the sharp capacity growth.

The market outlook remains positive.

SEBS possesses many good properties compared with other rubber and plastic products. The market will benefit from the strong substitution in the future. Meanwhile, the SEBS plants are ramping up efforts on R&D of medical-grade SEBS. The further application in the medical products market will be promising.