SBR Price Faces Headwinds in Rising in Nov and to Remain Weak in Short Term
Snapshot: In November, China’s SBR market price edged up after falling. The feedstock butadiene price dropped, and the supply-demand fundamentals of SBR dragged down the SBR price. Yet, the natural rubber price climbed, driving up the SBR price. It is projected that the SBR price may remain range-bound in the short term.
In November, China’s SBR market price faced headwinds in rising after falling. As of November 8, the market price of ESBR 1502 in North China closed at RMB 15,400/mt, down RMB 200/mt from November 1 and down RMB 1,250/mt from October 8. At first, the market price of feedstock butadiene fell below RMB 11,000/mt, dragging down the SBR market atmosphere. Second, downstream tire enterprises showed resistance to purchasing SBR when the price dropped and maintained basic purchases. Thus, the spot SBR resources circulated slowly in the market. Third, the operating rate of the SBR industry rose to around 76%, resulting in a rise in the SBR supply. Although the natural rubber price trended up, the increment failed to offset the drag from bearish factors. Thus, the price of spot SBR faced headwinds in rising.
The feedstock butadiene price saw an unexpected decrement, weighing on the SBR price.
The feedstock butadiene price moved down, curbing the SBR price. In November, China’s butadiene market price dropped to below RMB 11,000/mt. At first, the supply of spot butadiene was ample, and the cracker at Sinopec Tianjin Nangang went into production successfully, so some players held bearish sentiments. Second, although some downstream units were restarted, downstream users refused to purchase butadiene when the price moved down. Thus, the overall trading atmosphere was weak. The butadiene price saw an unexpected decrement, dragging down the SBR price.
From the perspective of profits, the profits of the SBR industrial chain transferred to the SBR industry. According to SCI, the gross profits of the SBR industry hit an annual high of RMB 1,688/mt on November 8. Driven by fairish profits, the operating rates at SBR producers were maximized, resulting in a rise in the SBR supply. Although the operating rate of the semi-steel tire industry remained higher than 75%, tire enterprises showed resistance to purchasing SBR when the price dropped. Thus, the demand remained weak. The increment in supply was larger than that in demand, weighing on the SBR price.
The SBR price is expected to slide in the short term.
SCI reckons that the SBR price may fluctuate downwards in the short term. The main reason was that the natural rubber price is likely to be range-bound, which may remain higher than the SBR price, fueling the SBR price. Yet, the feedstock butadiene price is expected to drop. Besides, the SBR supply-demand fundamentals may fail to affect the SBR price significantly. Thus, the SBR price is predicted to trend down in the tug of war between the bullish factor in the natural rubber price and the bearish factors in the SBR industrial chain.
Natural rubber: The natural rubber price is likely to be range-bound. Attention should be paid to the changes in the macro environment and typhoon expectations. In the production peak season, players may hold stronger expectations of the supply release in production areas. Yet, the typhoon weather is likely to weigh on the release of field latex in Hainan and Vietnam. Besides, overseas production regions may slow down the release of new field latex, so the supply may rise limitedly. At present, there are many uncertainties in the external environment. The fluctuation of the RMB exchange rate boosts players’ expectations of policies, so they may hold wait-and-see sentiments. In terms of demand, orders at downstream tire and products enterprises are likely to be mediocre, and the actual rigid demand may be weak. In the short term, the natural rubber is expected to trend sideways, boosting the SBR price.
Cost: China’s butadiene market price is expected to continue to trend down. The butadiene unit at Sinopec Tianjin Nangang went into production normally, and there may be products available in the short term, supplementing the butadiene supply. Thus, the supply may lend weaker support for the butadiene price. The spot supply in the market will be possibly ample. In terms of downstream industries, some units are likely to be restarted. Yet, most players may be resistant to purchasing butadiene when the price drops. Thus, the overall trading atmosphere is expected to hardly improve. The feedstock butadiene price is likely to drag down the SBR price.
Supply-demand fundamentals: PetroChina Lanzhou Petrochemical has canceled the maintenance plan and may run its unit normally. The other SBR units may be under normal production. Thus, the operating rate of the SBR industry is expected to hit an annual high. Yet, the demand has entered the traditional slack season, so the SBR consumption is expected to be stable-to-falling. As the supply may rise but the demand may tend to weaken, the supply-demand fundamentals are expected to fail to drive up the SBR price effectively.
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