Xie Zhenxing, Jinlianchuang (JLC)
Year 2021 is the start of the 14th five-year plan, in which, new capacity of non-oiled SBS will decrease and producers will trim production at existing units to ease supply-demand tension. At the same time, producers will increase export volume so as to build a healthy industrial chain circulating at home and abroad.
Non-oiled SBS Market Rose After Falling Throughout 2020
Non-oiled SBS prices rose after falling during 2020, and the duration of price reduction was quite long. The prices were concentrated at RMB10 508/ton, down by RMB3 137/ton or 22.99% from a year ago. In the year, the price of non-oiled SBS hit a historical low, and the price trend was opposite to that of derivatives in the dull and peak seasons.
Figure 1 shows the price trend of domestic non-oiled SBS (taking Baling Petrochemical’s 792E as an example) in 2020. It can be seen from the figure that the domestic non-oiled SBS in 2020 fluctuated in the range of RMB9 000-12 900/ton, a decline from that in 2019.
Figure 1: Domestic Non-oiled SBS Prices in 2020 (taking Baling Petrochemical’s 792E as an example)
Figure 2 shows the cost and profitof non-oiled SBS in China in 2020. Figure 3 shows the price trend of domestic non-oiled SBS (taking Baling Petrochemical’s 792E as an example) in 2021.
Figure 2: Domestic Non-oiled SBS Cost and Profit in 2020
Figure 3: Domestic Non-oiled SBS Prices in 2021
The Pace of Start-up of New Plants to Slow Down in 2021
The total capacity of domestic SBS was at 1.42 million tons in 2020. The output in 2019 and 2020 increased broadly because new units were put into production during the 13th Five-year Plan, especially in 2019 when a capacity of 220 kt/a came on stream. Table 1 shows the start-up of new SBS rubber plants in China from 2019 to 2021.
In 2021, the capacity release will slow down. The capacity is expected to increase by 420 kt, but only Gulei Petrochemical’s 100 kt/a unit will be put into production in June while there is no news of other units. The total SBS capacity in China is likely to reach 1.52 million tons in 2021.
Figure 4 shows the comparison of domestic SBS monthly output between 2020 and 2021. It can be seen from the figure that the domestic SBS monthly output hovered around 75 000 tons from January to April 2021, a decrease of 9.64% compared with the same period of 2020. Crude oil prices fell due to the outbreak of COVID-19. With the lower feedstock cost, producers took initiatives to release capacity. The SBS capacity hit a record high of 950 000 tons in 2020, which, however, also kept sufficient inventory for 2021 SBS market, especially for non-oiled rubber market. The decline in monthly output in 2021 is an effort made by producers to adjust supply to adapt themselves to the market change.
Figure 4: Domestic SBS Monthly Output, 2020-2021
The derivatives of non-oiled rubber mainly include asphalt modification, adhesive, and polymer modification. The consumption of non-oiled rubber in the asphalt modification sector is about 75%, and the increasing demand for non-oiled rubber is largely from the sector. Asphalt modification is mainly used in the construction of downstream roads. Demand is expected to increase during the 14th Five-year Plan for reasons as below: there will be new construction and expansion of expressways in 2021; some road projects have been extended from 2020 to 2021; there will be demand from main roads, primary and secondary roads; maintenance work is increasing.
The third quarter is the peak season of road construction consumption. With the concerns over supply-demand, producers may suffer from restricted orders and thus more units will be forced to be shut for maintenance. Table 2 shows the maintenance plan of domestic SBS rubber plants in 2021.
Figure 5 is a histogram of China's SBS import and export from 2016 to 2020. It can be seen from the figure that from 2016 to 2019, domestic SBS capacity and output increased rapidly, leading to a reduction in import volumes and an increase in export volumse. In 2020, import volumes increased while export volumes decreased due to the outbreak of the virus. It is worth mentioning that the export volumes were slightly higher than the import volumes in 2019, the first time in China's SBS import and export history.
Figure 5: Chinese SBS Import vs Export, 2016-2020
