How will China BD Market Unfold on Supply-Demand Rally?
Snapshot: From August, China’s butadiene market trended sideways after falling, and it perked up in mid-to-late August. The tight spot supply propped up the butadiene price somewhat. In September, the butadiene supply in China is likely to recover, so the support from supply may weaken. The overall market price of butadiene may continue to dip in September.
In late July, the market price of butadiene went lower notably. Yet, it began to move sideways from early August and leveled up in mid-to-late August. However, the overall average price of butadiene in August is expected to decline from July. As of August 21, the delivered price of butadiene in the Shandong market stood at RMB 13,050/mt, up 4.6% from end-July. Its monthly average price reached RMB 12,668/mt, down 4.6% M-O-M. In early-to-mid August, due to relatively ample resources and weakened downstream prices, the butadiene price mainly trended sideways. Yet, from mid-August, Shandong Yihua Rubber & Plastic Technology uplifted loads of its PBR units, so available butadiene resources at Shandong Shouguang Luqing Petrochemical dropped notably. Therefore, the market price of butadiene went higher somewhat. In late August, merchantable butadiene resources were limited at producers in Jiangsu. Besides, in East China, players hadn’t picked up resources at ports. Thus, the spot volume of butadiene slid greatly, underpinning the market price somewhat. Especially, the market price of butadiene in Shandong once surged to RMB 13,000/mt, hitting a monthly high in August.
In August, the supply-demand balance continued to enlarge, dragging down the monthly average price.
In August, China’s butadiene supply and demand balance may be around 34.5kt, and the total supply may continue to ramp up, failing to bolster the butadiene price. Therein, the butadiene output in China is estimated at 377kt, up 2% M-O-M. The import volume of butadiene in July may climb by 135% M-O-M to reach 28kt roughly, replenishing domestic resources to a certain extent. Thus, the overall butadiene supply in August may be loose. Despite the increment in domestic demand and exports, the support for the domestic trading atmosphere was relatively limited. Especially, prices of some downstream products may wane somewhat. Downstream users were reluctant to accept high-priced butadiene.
In H2 August, decrement in spot volume declined notably, bolstering the butadiene price somewhat.
In late August, the spot volume of butadiene in China leveled down notably. From mid-August, no butadiene resources at Shandong Shouguang Luqing Petrochemical flowed into the market. Besides, Shenghong Petrochemical cut loads of its crackers unexpectedly. Some export orders were delivered, while domestic butadiene orders were delivered slowly. Shandong Jinhai Chemical curtailed loads of crackers. Available resources in Northeast China and other producers were sparse as well. In East China, imported shiploads hadn’t arrived at ports yet. What’s more, during the contract pricing period from July 26 to August 25, traders needed to stock up in a bid to deliver goods. Thus, the overall spot volume of butadiene remained tight, supporting the market price. However, subdued by demand, the increment in butadiene price was limited.
In September, the butadiene supply may be loose, so the monthly average price is expected to go lower slightly.
In September, China’s butadiene supply may continue to be sufficient. The butadiene units under maintenance may be limited. Only several small ethylene units continued to remain offline. PetroChina Jilin Petrochemical took maintenance of the butadiene unit. Yet, its downstream units were shut down in sync, slightly affecting the butadiene market. Due to less unit maintenance, in September, it is expected that China’s butadiene output may rise to around 385.3kt. Meanwhile, in terms of import and export markets, imported shiploads of butadiene may ramp up at ports. In September, it is heard that there will be Europe, the Middle East, Southeast Asia and South Korea-origin butadiene resources concluded to China’s market, and the import volume of butadiene may total 35kt, replenishing China’s domestic market to a certain extent.
In terms of demand, in September, the demand for butadiene in China is expected to ramp up. Therein, the operating rate of PBR, SBS and other sectors may advance. Meanwhile, some downstream industries are likely to stock up ahead of the National Day holiday, underpinning the butadiene market somewhat. Yet, as seen from the export market, with foreign demand dipping, the Asian butadiene market may weaken. No Chinese-made butadiene resources in September are heard for export.
On the whole, affected by the supply rise and export drop, the average market price of butadiene in September is likely to slide. Yet, considering demand increment and stock-up activities ahead of the National Day holiday, the decrement in butadiene price may be limited.
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