H2, 2022: Uncertainties to Intertwine in China Butadiene Market
Keywords: Butadiene, Uptrend, Cost, Export, Commissioning time
Snapshot: In H1, 2022, China’s butadiene market remained in an upswing overall, and the overall price was notably higher than that in early 2022 despite a price drop in mid-June. In H2, 2022, there will be a large number of upstream and downstream units coming on stream, and players should closely eye on the commissioning time of these new units.
In H1, 2022, the overall market price of butadiene in China leveled up.
In H1, 2022, China’s butadiene market price remained in an uptrend overall. According to SCI, as of end-June, the butadiene price in Jiangsu-Zhejiang market reached RMB 10,600/mt, up 155% from RMB 4,150/mt in early 2022. The average butadiene price in Jiangsu-Zhejiang market was RMB 9,363/mt, up 20.66% from H2, 2021. The highest price of butadiene was RMB 12,650/mt on June 7, whilst the lowest one reached RMB 4,100/mt in early January.
In Q1, 2022, China’s butadiene market price hiked, taking cues from robust demand. In Q4, 2021, the butadiene price crashed to a relatively low level, in tandem with some fresh capacity coming online intensively. Thus, downstream profits extended gains largely, and some shut synthetic rubber units were restarted. Therefore, the consumption volume of butadiene ramped up. Favorable demand strongly pushed up the butadiene price. Besides, in Q1, ethylene crackers faced high cost pressure amid rising international crude oil prices. Affected by that, some crackers cut production, dragging down the butadiene output. Meanwhile, some butadiene units in South Korea faced hiccups briefly. The export of Chinese-made butadiene boosted the butadiene market price.
From mid-May to mid-June, China’s butadiene market price saw notable gains, strongly bolstered by an expected export increase in Chinese-made butadiene. Affected by high crude oil prices, crackers in Japan and South Korea didn’t resume to a high level. Due to the supply crunch of butadiene, batches of Chinese-made butadiene resources were exported to foreign markets for arbitrage, and the total export volume reached over 30kt in May and June. As a result, available spot butadiene was curtailed notably in China’s market, driving up the butadiene price accordingly. In other periods of H1, 2022, the market price of butadiene remained flat and mainly saw minor movements.
Fundamentals periodically bolstered the butadiene market price amid a supply-demand rally.
In H1, 2022, China’s butadiene supply and demand both saw increases. In H1, the butadiene output and import volume reached 2,020kt and 69kt respectively. The butadiene consumption volume and export volume was 1,980kt and 44kt respectively. Overall, the butadiene supply and demand trended up, but the increment in supply was higher than that in demand. As seen from the supply-demand balance, it reached 21kt in Q1, 2022, down 48.6kt from Q4, 2021. Butadiene supply was slightly higher than demand, but the ample supply status eased. Thus, fundamentals lent certain support to the market. Yet, in Q2, 2022, the supply-demand balance of butadiene enlarged to 49kt, lending weaker support to the butadiene price from Q1, 2022.
High crude oil prices lent robust cost support to the butadiene price.
From 2022, prices of crude oil trended at highs, so downstream industries faced high costs. As a by-product of ethylene crackers, butadiene also saw high cost pressure in 2022. Although butadiene was not a feedstock-dominated product, the butadiene output dented, in the wake of dropping loads of crackers caused by thin profits. The expected export of Chinese-made butadiene had a notable impact on the market trend in Q2. The operating rate of crackers in Japan and South Korea was curtailed, so there was a supply gap of butadiene. Some Chinese-made butadiene resources were exported for arbitrage, and the export volume reached over 30kt in May and June, alleviating China’s butadiene supply pressure.
Uncertainties intertwine in China butadiene market in H2, 2022.
In H2, 2022, there will be a large amount of new butadiene and downstream capacity kicking off in China, but uncertainties in commissioning time will have an impact on the butadiene market. According to SCI, a total of 740kt/a fresh butadiene units is expected to come on stream in H2, especially in end-Q3 and Q4. As seen from downstream industries, new ABS, adiponitrile, PBR and SBR units are expected to go into operation, especially for ABS and adiponitrile industries in Q3 and Q4. If the above new units will come online as scheduled, China’s butadiene resources will be tight, which will bolster the butadiene price to a certain extent. In H2, China’s butadiene market is likely to gear up mingled with some sideways.
As seen from the current demand, most downstream industries are in the stage of de-stocking, and end industries consume feedstock at a slow pace. Besides, most downstream industries face losses. Affected by that, if the commissioning time of new downstream units is postponed, China’s butadiene market price will hardly pick up, along with the release of butadiene capacity in Q4. Yet, considering that demand will rally in H2, the social inventory of downstream industries will be consumed in succession. The lowest price of butadiene in H2 may be higher than that in H1.
All information provided by SCI is for reference only, which shall not be reproduced without permission.
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