Aug BD Profits Inch Up with Downstream Profits Varying
Introduction: In August, China’s butadiene market fluctuated within a narrow range. With limited price fluctuations, industry profits edged up. Profits among major downstream products varied. Nonetheless, from the perspective of the entire industrial chain, profits within the industry chain remained concentrated at the feedstock end. Looking ahead to September, profit distribution across the industry chain may hardly show notable changes, yet reduced losses in some downstream sectors may bolster operating rates.
In August, China’s butadiene market prices largely moved within a narrow range after a slight increase at the beginning of the month. The spot supply pressure was not high, and positive macroeconomic factors boosted the market atmosphere, supporting butadiene prices. On the demand side, planned maintenance of downstream units decreased during the month, so the demand side also underpinned butadiene prices. However, as end demand remained tepid, most downstream players were cautious about buying feedstock at high prices. Consequently, the increment in butadiene prices was limited, but the support to the price floor was relatively strong. With costs inching down MoM, the theoretical profit of butadiene production via C4 extraction technology increased by about 8% MoM to approximately RMB 2,900/mt, remaining relatively favorable.
At present, due to increased feedstock costs during the month, profits of butene ODH units have declined to near the cost line. Therefore, partial butene ODH units in China remained offline. C4 extraction technology units still contributed to most of China’s supply. Overall, butadiene industry profits remained acceptable.
In August, in terms of major downstream sectors, profits of the SBR and SBS industries improved, while those at the PBR and ABS industries declined. In terms of the industrial chain, downstream sector profits lagged behind butadiene sector profits. Some downstream industries even operated at a loss, but compared with historical data, their losses were not high. Thus, the overall downstream operating rate remained fairish. Currently, operating rates of the PBR and SBR industries are around 70%, which is relatively high. The operating rate of the ABS industry is about 64%, and for the SBS industry, it is around 56%, both remaining relatively stable.
Looking ahead, there may be a few planned maintenance of major downstream units. Profits will likely remain a key factor influencing operating rates of some downstream sectors. In September, the macroeconomy will possibly see positive factors. Coupled with slightly improved consumption expectations, some downstream product prices are expected to rise, lessening several downstream industries’ losses. As a result, operating rates of downstream industries are estimated to remain relatively high in September, so the demand side is forecasted to prop up butadiene prices. Nevertheless, with butadiene prices remaining strong, profits within the industry chain are likely to continue concentrating at the feedstock end.
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