Why Is China BD Supply So Tight in H1, 2024?
Snapshot: In H1, 2024, China’s butadiene market price fluctuated upwards, mainly underpinned by the supply. On the one hand, China’s butadiene output declined. On the other hand, the export volume of butadiene in China climbed, but imports were hardly replenished. Therefore, China’s butadiene market faced a supply crunch. In H2, 2024, the number of units under maintenance may trend down. Some new butadiene units are expected to kick off. In H2, 2024, China’s butadiene supply may ramp up from H1.
In H1, 2024, China’s butadiene market price remained in an uptrend. In Q1, the butadiene price fluctuated upwards, and in Q2, it mainly hovered at highs. In June, driven by a surge in PBR futures price, the market price of butadiene also notched an annual high. Apart from June, the tight supply penetrated the overall H1, 2024, and why did China’s butadiene market face tight supply?
China’s butadiene output declined, stemming from no release of new capacity and more losses caused by unit maintenance.
In H1, 2024, China’s butadiene output dropped Y-O-Y. Due to profit losses, China’s and foreign crackers ran at low loads. In H1, 2024, some of China’s butadiene units experienced scheduled or unexpected shutdowns. Besides, for lack of profits, some small ethylene crackers in China were shut down for a long period, leading to a Y-O-Y increase in output losses. According to SCI, in H1, 2024, the output losses caused by unit turnarounds in China reached 217.8kt, up 74.2kt or 52% Y-O-Y. In H1, 2024, China’s butadiene output totaled 2,120kt, down 1.85% Y-O-Y. Besides, in H1, 2024, there was no fresh butadiene unit coming online. Shandong Jincheng Petrochemical Group conducted a trial run of its new butadiene unit, without premium-grade products available. It plans to have a test run again in Q4, 2024. At present, most new butadiene units will be released in Q4, hardly replenishing China’s domestic market in H2, 2024.
The import volume of butadiene remained limited, with high import price.
In H1, 2024, the import volume of butadiene in China was limited. Despite a Y-O-Y rise in import volume in January and February, it began to slide from March, especially in May and June when the imports remained low. On the whole, the volume of deep-sea cargoes to Northeast Asia diminished. Besides, as the operating rate of crackers in Southeast Asia dipped, available butadiene resources were also limited. SCI estimates that the import volume of butadiene in H1, 2024 may be around 160kt, down 5.9% Y-O-Y.
The export volume of butadiene trended up notably, intensifying tight spot supply in China.
In H1, 2024, the export volume of butadiene in China picked up notably. According to SCI’s forecast, it is predicted that the export volume of butadiene in China may reach 82kt roughly, up 96.6% Y-O-Y. At present, the export enterprises mainly cover the butadiene producers such as Sinopec, Zhejiang Petroleum & Chemical, Shenghong Petrochemical and Hengli Petrochemical. Due to intensive exports from producers, their available spot resources moved down obviously, intensifying the tight spot supply status in China. Centralized exports greatly pushed up China’s butadiene market price.
As seen from China’s consumption, in H1, 2024, due to the high butadiene price, the operating rate of downstream industries was average. The consumption volume of butadiene was around 2,150kt, almost flat Y-O-Y. On the whole, China’s butadiene output dropped, without sufficient imports replenished. Besides, the export volume ramped up greatly. Coupled with flat domestic consumption, the overall butadiene supply remained tight in H1, 2024.
In H2, 2024, the number of butadiene units under maintenance may decline compared to H1. At present, only North Huajin Chemical Industries (120kt/a), Sinopec & SK (Wuhan) Petrochemical (130kt/a) and Fujian Refining & Petrochemical (180kt/a) plan to conduct scheduled maintenance of their units. The maintenance time of units at Sinochem Quanzhou Petrochemical and PetroChina Guangdong Petrochemical is still to be determined. Shandong Jinhai Chemical has experienced unplanned shutdown, without exact restart time. On the whole, the number of unit maintenance may drop notably from H1. Besides, in Q4, some new butadiene units may kick off covering Sinopec Tianjin Nangang, Shandong Jincheng Petrochemical Group and Shandong Yulong Petrochemical, replenishing the supply in the market. The overall supply in H2, 2024 may be more ample than that in H1. Players should pay attention to the changes in downstream loads as well as the impact of new downstream capacity release on the price.
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