BD Prices Stop Falling, While Uncertainty to Persist
Introduction: In mid-May, the butadiene price dropped rapidly, and it stopped falling in early June. Limited sales pressure from the supply supported the butadiene price. Besides, as the price spread between butadiene and downstream products widened, the buying interest of some downstream enterprises improved, restricting the decrement in the butadiene price. However, in the coming period, the demand growth and the supply recovery may be critical factors influencing price trends.
In May, affected by eased tariff policies and unexpected shutdowns of some butadiene units, the butadiene price rose significantly in H1 May. However, as butadiene prices rallied, most downstream products could not raise prices fast enough. Some downstream industries cut their operating rates or even shut down units. Besides, the price of PBR futures showed a weak trend, dragging down trading sentiment in the butadiene market. Thus, the butadiene price fell rapidly in H2 May. In H1 June, as the price spread between butadiene and downstream products gradually widened and spot supply pressure was not high, the negotiation atmosphere in the butadiene market warmed up slightly. Therefore, the butadiene price stopped falling. As of June 4, the delivery price of butadiene in the Shandong market lingered at RMB 9,350/mt, down 25.73% from the mid-May peak. In the short term, limited pressure on supply and moderate stockpiling demand from downstream enterprises underpinned the butadiene price. However, in the coming period, as butadiene supply is likely to gradually resume, the recovery of demand will possibly remain uncertain.
The supply is expected to increase.
At present, China’s butadiene units have largely undergone maintenance. A total of 1,005kt butadiene units at Nanjing Chengzhi Yongqing Energy Technology, Jiangsu Sailboat Petrochemical, Hengli Petrochemical, Wanhua Chemical Group (Phase l), Zhejiang Satellite Petrochemical, Sinopec Beijing Yanshan Company, Shandong Shouguang Luqing Petrochemical and Zhejiang Petroleum & Chemical (Phase II) remained offline. Thus, China’s butadiene output was low. Besides, the butadiene imported resources that arrived at ports were limited, so the available resources in the port area were not high. Consequently, the supply underpinned the butadiene price. Nevertheless, with the arrival of some imported resources and the restart of China’s units, the butadiene supply is expected to grow in H2 June. As seen from the spot circulation, although there may be no available resources at Zhejiang Satellite Petrochemical, Shenghong Petrochemical and Shandong Shouguang Luqing Petrochemical, some butadiene resources at Liaoning Bora Petrochemical, Sinopec SABIC Tianjin Petrochemical and Sinopec INEOS (Tianjin) Petrochemical are estimated to flow to the market. As a result, the support from the supply may wane in H2 June. Nonetheless, due to recent policy impacts, ethane imports were hindered. Changes in the operating rate of some ethane crackers in China may influence butadiene output.
The decrement in demand was limited, while the uncertainty in the butadiene market was high.
Due to the previous high butadiene price, most downstream industries faced high-cost pressure. Thus, they cut their operating rates or even shut down units. The butadiene consumption dropped, failing to bolster the butadiene price. However, the decrement in operating rates of downstream industries was limited. Coupled with the recovery of the butadiene supply, some downstream units were expected to restart. The overall operating rate of downstream industries depended on the price spread between butadiene and downstream products. Recently, with the PBR production cuts, the PBR inventory was consumed. The fundamentals were expected to improve in mid-to-late June.
The butadiene supply is expected to gain. The butadiene demand is anticipated to grow as well, but the increment in demand may depend on the price spread between butadiene and downstream products. From the perspective of supply, with the restart of units and replenishment of imported resources, the support from supply may weaken. Yet, the butadiene supply is estimated to recover in succession and some downstream units are expected to restart, propping up the butadiene price from the bottom.
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