China’s SBS De-Stocking in April
In April, China’s SBS trading activities increased greatly. Within this week, sales of dry SBS and oil-extended SBS hit new highs in recent years. The demand for SBS from the waterproof roll industry and the modified bitumen industry recovered successively, and the overall demand from other industries underperformed. The transfer of social inventory to downstream industries sped up.
Compared with the sales of SBS from January to March 2020, China’s SBS sales in April roe notably, and the de-stocking at SBS plants sped up. Around the Tomb-Sweeping Day holiday, the oil-extended market saw the sales increase at first, and the inquiry and sales in the dry SBS and road modification-used SBS markets improved obviously in mid-April.
Up to April 24, major SBS producers basically completed the sales tasks this month. Sales of dry SBS were 72kt, and sales of oil-extended SBS were 28.5kt, totaling 100.5kt which was greatly higher than the output in April.
Reasons for the increase in SBS sales: 1. China’s dry SBS and oil-extended SBS prices hit historical lows, so downstream enterprises were more willing to stock up. 2. Downstream enterprises had high-priced SBS inventory, and they were in need of low-priced SBS inventory. While sales were rising, the transfer of social inventory to downstream industries was accelerating. Up to April 24, the inventory at SBS producers and surrounding deposit warehouses (including resources sold but not picked up) was 68kt, down 49kt or 41.88% M-O-M.
In April, China’s SBS supply was relatively abundant. Up to April 24, China’s dry SBS theoretical gross profit was RMB 2,862/mt, and driven by good profit, operating rates at China’s SBS producers were high. Therefore, China’s SBS output continued increasing. China’s SBS output in April is predicted to total 83kt, up 2kt M-O-M.
Judging from the downstream actual operating rate and consumption of SBS, various downstream industries performed differently, but the overall consumption was weak. The demand for SBS from the waterproof roll industry was relatively strong. In April, according to the sampling survey of China’s TOP10 waterproof roll enterprises, most of them resumed the operating rate to the same level last year. There were many large inquiries from waterproof roll enterprises, and the delivery time was short, which reflected the rigidity of the demand. The modified bitumen industry had more purchasing behaviors, but the actual consumption was limited. In terms of regional actual operating rates and consumption, the demand recovery in southern regions was fairish, but the start-up in some regions of South China was limited. The demand in northern China is predicted to increase successively in May. The shoe material industry stocked up obviously, but the actual consumption volume was less than that in March. In April, the operating rate of the shoe material industry dropped greatly. The SBS inventory at most TPR shoe material plants had been saturated after the intensive replenishment in H1 April.
In April, China’s SBS sales increased, but the overall downstream consumption volume was difficult to offset the current output. Therefore, the social inventory continuously accumulated. After the intensive replenishment, the sales pressure on China’s SBS producers eased. However, the demand in H2, 2020 will be lowered, and China’s SBS supply and demand contradictions are likely to be severer.
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