Will Shutdown of Sinopec Qilu Company Cause Supply Shortage?

In mid-October, it was heard that Sinopec Qilu Company will shut down all of its SBR units in November. This shutdown plan will have great impact on the whole SBR market as SBR output from Sinopec Qilu Company accounts for 30% roughly of the total SBR output. Since late October, some SBR producers ramped up their operating rates to make up the supply gap caused by the shutdown of SBR units at Sinopec Qilu Company. Thus, what changes will be seen in the output of those SBR producers? Will the supply gap be made up?

In October, SBR output declined M-O-M.

According to SCI’s statistics, SBR output was 85.6kt in October 2017, down 8.74% M-O-M but up 6.87% Y-O-Y. The total output of SBR was 810kt from January to October 2017 was up 10% roughly compared with the same period of last year.

China’s SBR market stopped declining and then fluctuated upwards in October. Prices increased too quickly in October while those of feedstock saw notable decreases. Thus, the production cost pressure on SBR producers was relived to some extent, yet those producers were still under deficit. The theoretical cost was RMB -800/mt in October, and the loss narrowed compared with that in September.

In November, the total output of SBR is planned to diminish M-O-M.

According to SCI’s statistics, the planned output of SBR will be 80kt in November, down 6.54% M-O-M. Therein, planned output of SBR 1502 and 1502E will be 41kt, down 2.3kt M-O-M. That of SBR 1500E will be 12.4kt, up 0.4kt M-O-M. That of oil-extended SBR will be 26.6kt, down 3.7kt M-O-M.

All SBR units at Sinopec Qilu Company are planned to be shut down in mid-November. Those SBR producers who intend to expand their market shares will plan to improve the SBR output amid the passable marginal benefit. Thus, although 14–16kt of SBR will be reduced at Sinopec Qilu Company in November, the actual supply gap in the market is expected to edge down than expectation as Hangzhou Zhechen Rubber, Zhejiang Weitai Rubber and Fujian Fuxiang Chemical, etc. have plans for improving SBR output.