Will BD Prices Stop Falling After Rapid Drop?
Introduction: Since mid-October, China’s butadiene market price has dipped rapidly, sliding to a low point in nearly two years. Expectations for a notable increase in supply, coupled with maintenance at some downstream units, weakened fundamental support for the butadiene price. The pessimistic outlook dragged the price down quickly. At present, the supply pressure on butadiene has not been fully relieved. Within the month, the market price may continue to drop. However, given the fact that expectations have already been somewhat digested, the price decrement may be limited.
Prices slipped rapidly to a two-year low.
Since mid-October, the decline in China’s butadiene market price has accelerated. By November 5, the delivered price of butadiene in the Shandong market was RMB 6,950/mt, down 18% from the price in mid-October, hitting a nearly two-year low. Affected by limited overseas demand, available resources in the USD market surged. Since mid-October, some slightly lower-priced transactions have been heard in the USD market, noticeably weighing on China’s market atmosphere. In China, with the restart of some units and the gradual release of new capacity, the butadiene supply became relatively ample, increasing the available spot volume. Nevertheless, on the demand side, starting from late October, partial PBR units entered maintenance successively. Operating rates in the PBR and ADN industries are expected to decline in November, driving down butadiene consumption. Affected by weak supply and demand, butadiene prices started to fall rapidly. In early November, butadiene prices hit a new two-year low.
Supply increment is expected to curb China’s market atmosphere.
Entering November, the overall maintenance intensity for China’s butadiene units went down, and a couple of units restarted in succession. Coupled with expected trial runs of new units in South China and stable operations of newly started units, China’s butadiene output soared. Furthermore, as commissioning dates of new matched downstream units were marginally delayed, the spot availability in the butadiene market boomed, leading to sufficient market availability. China’s total butadiene supply in November is projected to increase by about 10% compared to October, indicating significantly weakened support from the supply side.
Since August, the monthly import volume of butadiene has been at high levels within the year, mostly no less than 50kt. The import volume in Q4 may continue to hit new highs. Due to relatively limited overseas demand, both off-shore and deep-sea resources noticeably supplemented China’s butadiene market. Especially, deep-sea cargoes continued to replenish China’s market throughout the year. In Q4, deep-sea cargoes will probably keep flowing into China, and available off-shore resources will possibly also be relatively ample. The gradual decline in butadiene prices, along with other factors, curbed China’s market sentiments. The import volume in November is unlikely to be less than 60kt. In Q4, the import volume is likely to reach 150-200kt, obviously supplementing China’s market supply.
Demand is expected to drop.
Prices reached a temporary bottom and may face further decline within the month.
With butadiene prices falling rapidly, the weak expectations have been gradually digested. Currently, butadiene prices have staged a bottom. However, considering persistent pressure from the supply side, butadiene prices are predicted to keep declining within the month, but the decrement is anticipated to narrow noticeably. With the price spread between butadiene and downstream products widening gradually, downstream enterprises saw passable operating rates and successively replenished inventory to meet essential demand, underpinning butadiene prices to some extent. However, looking ahead, butadiene supply will likely remain relatively abundant. Expected imported cargoes have not intensively arrived at ports yet, and new units in South China have not released resources. Thus, the pressure on some northern manufacturers has not been effectively alleviated, and the supply side may still face certain pressure. Considering the current lack of clear guidance and the partial digestion of previous weak expectations, the price decrement of butadiene may be limited. Attention should be paid to the progress of subsequent resource release.
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