SBS Operating Rate Remained Falling with Expected Weak Demand
Snapshot: The operating rate of China’s SBS industry was 43.48% in May, down 5.15% M-O-M. In May, the operating rate of China’s SBS industry stayed low. Although the gross profit at enterprises was fairish, some major units took maintenance in May, and the demand was expected to be weak, curbing the operating rate in May.
This research covers 15 sample enterprises. There are 5 state-owned enterprises, 1 Taiwan-funded enterprise and 3 private enterprises, with the total capacity of 1,720kt/a. The coverage rate of the sample SBS producers was 100%.
The operating rate of China’s SBS industry was 43.48% in May, down 5.15% M-O-M. In May, the operating rate of China’s SBS industry decreased notably. The fundamentals in the SBS market were relatively weak. The tepid demand constrained the SBS supply. Besides, some major units took maintenance. The SBS unit at Sinopec Baling Company entered the annual maintenance period. Some production lines at Liaoning North Dynasol Synthetic Rubber and Heze Kexin Chemical were shut for turnarounds. Thus, the monthly operating rate of the SBS industry fell significantly.
In May, the profit of the SBS industry was fairish. The butadiene price fell more quickly than the SBS price. In May, the butadiene price at Sinopec in East China closed at RMB 7,000/mt. The styrene price fluctuated downwards and closed at around RMB 7,700/mt. The cost line moved down. The monthly average cost in May slid by around 5.33% M-O-M, while the profit ramped by RMB 1,379/mt M-O-M theoretically. (Due to the continuous dynamic changes in the price of initiators, the processing cost of producers cannot adopt constant data. The above profit data reflects the trend of profit changes.)
Despite the fairish profit, downstream demand was the major factor affecting the operating rate of the SBS industry. In May, the overall downstream industries underperformed. Dragged down by the current foreign trade situation, the SBS consumption in the shoe material industry and TPE industry crashed. As the project fund was issued slowly, the local urban investment faced prominent due debts, the road bitumen modification industry consumed SBS slowly. Due to the real estate market environment and the adjustment of formulas, the waterproof roll industry consumed less SBS. The SBS consumption was expected to decline. Thus, the SBS suppliers faced headwinds in selling goods. The tepid demand weighed on the SBS supply.
Forecast:
In June, the overall operating rate of the SBS industry is expected to stay low. The SBS unit at Sinopec Baling Company may be still under maintenance. Some production lines at Heze Kexin Chemical are expected to take turnarounds. The SBS output is likely to decrease. However, the social inventory of SBS may be ample. The decrease in the SBS output is predicted to affect the SBS supply limitedly. Major downstream industries may enter the slack season. Especially it is the rainy season in southern regions in June, affecting the road bitumen modification. Thus, the downstream procurement is likely to slow down. SCI reckons that the SBS market price is estimated to trend down in June, dragged down by several bearish factors.
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