Jan-Feb 2024 China SBS Imports Hit New Highs
From January to February, China’s SBS import volume was high, increasing the supply pressure on China’s SBS market.
According to GACC, China’s SBS import volume was around 15,636mt from January to February 2024, up over 49% Y-O-Y. The import volume of SBS resources from a certain European country ranked first. Therein, China’s SBS import volume was around 12,607mt in February, up around 316% M-O-M and up about 66% Y-O-Y. At the beginning of 2024, China’s SBS import volume increased notably. The import price was lower than the price of Chinese-made equivalent SBS products. Additionally, the SBS imports from January to February accounted for 10.66% of China’s total SBS supply, strongly affecting China’s SBS supply.
The imported SBS increased, intensifying China’s SBS market competition.
Many of China’s SBS units approved earlier came on stream, and some matched downstream SBS units of large-scale ethylene integration units went into production. Meanwhile, Sinopec increased the layout of SBS capacity in coastal areas based on exports. Therefore, China’s SBS capacity continued to expand. In 2023, China’s total SBS capacity was 1,770kt/a, up over 10%, further highlighting the imbalance between supply and demand in the market.
As China’s import volume of SBS is still expected to be high in 2024, and low-priced imported resources may replace Chinese-made SBS more rapidly, the SBS market competition is predicted to intensify gradually. In terms of demand, most traders and downstream players stopped trading in Q1 when it was the traditional demand slack season, especially around the Spring Festival holiday. In March, the downstream demand recovered slowly, so the market saw an oversupply. When the rise in the feedstock butadiene price drove up the cost, the low-priced imported resources weighed on the uptrend of China’s SBS prices, triggering a series of reactions including the profits of the SBS industry shrinking and the operating rate hitting a new low.
According to SCI, the average profits of China’s major dry SBS grade production were RMB -262/mt in Q1, down 134.2% Y-O-Y. Especially in February and March, China’s SBS industry faced higher losses, and some major SBS producers even failed to guarantee the marginal benefits, leading to intensive production cuts at SBS producers. China’s monthly average operating rates of the SBS industry were 49% in January, 40% in February, and 44% in March, down 11-20 percentage points Y-O-Y. In February, China’s operating rate of the SBS industry hit a new low in the last 22 months.
Major downstream industries gradually chose to follow the logic of low costs, putting pressure on Chinese-made SBS products.
Affected by China’s macro fund environment and the real estate market environment, China’s road bitumen modification industry and waterproof roll industry saw severe market competition with orders gradually getting concentrated at top enterprises. Downstream enterprises cut production costs to cope with the market competition, which had more requirements for research and development. According to SCI, due to low costs, the prices of some imported resources were over RMB 1,000/mt lower than those of Chinese-made grades, highly affecting the costs of these two downstream industries. Thus, downstream enterprises accelerated the replacement of Chinese-made resources with imported SBS resources.
According to SCI, some leading downstream enterprises have completed the formula test of imported SBS and replaced Chinese-made SBS with imported resources. In addition, with the imported resources increasing, more industries including the shoe material industry and the adhesive industry may replace Chinese-made SBS with imported resources, which is expected to squeeze the market of Chinese-made SBS products in the future.
The rise in imports may accelerate the adjustment of China’s SBS supply pattern.
According to SCI, in the next three years, China’s SBS capacity is expected to expand rapidly, with the newly added capacity totaling 215kt/a. Considering the flow of imported SBS resources, European main producing areas may accelerate the layout in Asia, especially in China’s market. In the future, China’s SBS import volume will possibly continue to increase, intensifying the oversupply in China’s market. The rise in SBS imports is likely to accelerate the adjustment of China’s SBS supply structure, promoting the elimination of backward capacity and accelerating the conversion of flexible units to other product capacity.
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