Year:2018 ISSUE:10
COLUMN:POLYMERS
Click:289 DateTime:May.22,2018
By Tan Jie, Research Institute of Sinopec Maoming PC
With the completion and launch of a number of newly built or expanded plants in recent years, the world's SBC capacity has been growing steadily. Total capacity in 2017 increased to 2.857 million t/a. In the next few years, most of the world’s new SBC capacity will be in Asia, and it is estimated that by 2022, global capacity will reach 3.1 million t/a.
In 2017, the world's annual SBC consumption increased to 2.08 million tons, with the increase driven mainly by sectors like asphalt modification, footwear, adhesives and sealants. Asphalt modification consumed 39.4% of the total, footwear 23.6%, adhesives and sealants 19.8%, and polymer modification 6.3%. From 2017 to 2022, the world's demand for SBC will likely increase at an average annual rate of 3.7%, and by 2022, demand will reach 2.5 million tons.
Domestic products with characteristics
Huizhou LCY Elastomers and Sinopec Baling PC are the two largest SBC manufacturers in China, each having 300 kt/a capacity. China’s major producers in 2017 are shown in Table 1.
Table 1 China’s major SBC producers, 2017
Producer | Capacity (kt/a) | Products |
Sinopec Baling PC | 300 | SIS/SBS/SEBS/SEPS |
Sinopec Yanshan PC | 90 | SBS |
Sinopec Maoming PC Ethylene Industry Company | 80 | SBS |
Huizhou LCY Elastomers | 300 | SBS/SEBS |
PetroChina Dushanzi PC | 80 | SBS |
ARLANXEO-TSRC | 60 | SEBS/SIS |
LG Botian | 60 | SBS |
Ningbo Keyuan Plastics | 100 | SBS/SEBS/SIS |
Ningbo Oretel Polymer | 20 | SIS/SEBS |
Shandong Jusheng Technology | 40 | SIS/SBS/SEBS |
Guangdong Sunion Chemical & Plastic | 30 | SBS/SIS |
Liaoning North Dynasol Synthetic Rubber | 50 | SBS |
Shandong Huayu Synthetic Rubber | 60 | SBS |
Ningbo Jinhai Chenguang Chemical | 30 | SBS/SIS |
Total | 1 300 |
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With construction and commissioning of a number of new or expanded units, China's SBC product structure has changed from offering only styrene-butadiene-styrene block copolymer (abbreviated as SBS) to the co-existence of SBS, styrene-isoprene-styrene block copolymer (abbreviated as SIS), hydrogenated SBS (SEBS for short) and hydrogenated SIS (SEPS).
Import & export
China's SBC import volume kept decreasing from 2006 to 2014, with continually increasing domestic capacity and output, but it rose in 2015 and 2016 due to increasing demand, and then dropped again to 42 600 tons in 2017, which was a decrease of 29.00% YoY. There are also small volumes of exports. In 2017, the export volume was 26 700 tons, a YoY increase of 50.85%. Most imports in 2017 came from Taiwan, South Korea, Japan and the United States, and the total import volume from these regions reached 36 300 tons, or 85.21% of the total, a YoY decrease of 33.15%. Taiwan sent 15 400 tons, or 36.15% of the total, down 40.31% YoY.
Major export destinations of SBC in 2017 were the Netherlands, Italy, Vietnam, Turkey, Taiwan and India, together taking 14 200 tons, or 53.22% of the total, a YoY increase of 153.85%.
More SBC will be consumed in making road asphalt and waterproof sheet
The consumption of SBC in China has been increasing steadily. In 2017, the apparent consumption amounted to 895 900 tons, with 33.0% consumed by the shoe-making sector, 36.0% by road asphalt modifiers, 12.0% by the waterproof sheet industry, 6.0% by polymer modification, and 9.0% by adhesives.
The state’s support for highways and other infrastructure projects is strong throughout the “Thirteenth Five-Year Plan” period (2016-2020). “The Belt & Road” and “Beijing-Tianjin-Hebei integration” programs urgently need construction of related infrastructure, so a growing share of SBC will be applied to the construction of municipal, provincial, and inter-city roads. Meanwhile, expanding rail transit and other large public infrastructure will stimulate the use of waterproof materials, and the waterproof sheet industry will be further concentrated. The traditional waterproof sheet will gradually be replaced by SBC waterproof sheets, due to strict environmental protection policies. Other traditional downstream industries like TPR shoe materials and solvent-based adhesives will continue to decline, while footwear enterprises will expand to upstream sectors. The adhesive industry is subject to environmental regulations, and therefore it will not consume much SBC. By 2022, China's demand for SBC will reach 950 000 to 1 000 000 t/a.
Market prices of SBC (take oil-extended SBS for instance) have continually declined recently. Given slower growth of demand and excess supply, the market prices of SBS will remain low, if the market prices of butadiene and styrene do not rise.
Threats from overcapacity & substitutes
Overcapacity is worsening
In the next few years, China will see many new/expanded SBS units, including Sinopec Baling PC’s new 50 000 t/a SBS/SEBS unit, Shandong Jusheng Technology’s 30 000 t/a SBS/SEBS unit, Ningbo Jinhai Chenguang’s (new) second phase 30 000 t/a SBS/SIS unit, Shandong Wanda’s 30 000 t/a SBS unit, Zhuhai Aosheng's 30 000 t/a SEBS/SEPS unit, Arlanxeo-TSRC’s 25 000 t/a SEBS unit, Fujian Gulei Refinery’s 100 000 t/a SBS unit, etc. If these projects all proceed as scheduled, by 2022, China's SBC production capacity will likely exceed 1.5 million t/a. Overcapacity will be more prominent at that time, and market competition will further intensify.
Multinationals accelerate entry into the Chinese market
Large international petrochemical companies have established production facilities in China through joint ventures or wholly-owned operations, accelerating access into the Chinese market. For example, China used to import BSC mainly from Taiwan. Now, LCY has built large-scale plants in Mainland China and will further strengthen its presence in the Chinese market, putting heavier pressure on domestic companies. At the same time, due to the rapid growth of new capacity in recent years, global oversupply has been further exacerbated. So, more high-quality products from Taiwan, South Korea and Japan entered the Chinese market, forcing China's SBC companies to compete at new levels of production technology, cost, marketing and management.
Threats from alternative products such as EVA and PVC
For shoe sole manufacturing, EVA consumption is only 80% of that of SBC, and EVA soles are more durable, lighter in weight, more comfortable to wear, lower in cost and more profitable. More and more shoe factories have already shifted to EVA soles. Meanwhile, injection molded PVC foam, which can also replace SBC, has significant advantages in production costs. As the world's footwear-making base is shifting to countries and regions with lower labor costs such as Vietnam and India, the demand from the footwear industry in China will gradually decline.
Pressures from renminbi appreciation & rising labor costs
Appreciation of the renminbi has enhanced the market competitiveness of imported products and weakened the export competitiveness of domestic SBC products, especially SBC footwear. In addition, with the increasing cost of labor in China, overall production costs will increase accordingly, and profits will thus be reduced.
Influences from domestic policies and raw material prices
Supply-side reform and new transport regulations, increasingly stringent environmental protection, and the availability and prices of butadiene and styrene will have great impacts on China’s SBC market.
Future development
Given overcapacity, investors in new or expanded capacity should consider both the availability of raw materials and the development of downstream markets. With a greatly increased market share for dry rubber and stable consumption for oil-extended rubber, Chinese producers should clarify their product development strategies, adjust product structure, and improve product quality standards and control systems to ensure their products are made for the market’s needs. They should accelerate the development of new catalysts and new processes, optimize production technology, conserve energy, reduce material consumption, and increase their competitiveness in the international market, while accelerating transformation of equipment and building multi-purpose lines to produce SBS, SIS, SEBS, solution styrene butadiene rubber (SSBR), various vinyl polybutadiene rubbers and K resin to adjust output of varieties according to market needs. They should also intensify applied research and develop high-end new products for polymer modification and adhesives as soon as possible to broaden applications; actively develop and upgrade products such as SEBS, SEPS, epoxidized SBS (ESBS) and SBS with grafted functional groups to meet domestic demand and earn greater financial benefits.
