China BD Market Stays High on Sustained Bulls
Snapshot: In March, China’s butadiene market price fluctuated at highs. Butadiene exports and expected unit turnarounds greatly pushed up the trading atmosphere. Besides, prices of natural rubber and synthetic rubber surged, underpinning the butadiene market. In March, some downstream enterprises curtailed loads of their units, but the overall impact on butadiene price was limited. In the short run, some Chinese-made butadiene resources for April are scheduled to be exported. Moreover, expected unit maintenance will still bolster the butadiene price. In the later period, players should pay attention to the capacity release of new units, deep-sea cargo inflow to the Asia market and changes in downstream units’ loads.
In March, China’s butadiene price fluctuated upwards, backed by bull factors.
In March, China’s butadiene market price hovered at highs. As of March 18, the butadiene price in Shandong Market was RMB 11,300-11,900/mt. Due to exports of some resources for March and unit maintenance at Shenghong Petrochemical from mid-March, China’s butadiene spot supply was tight. Moreover, some Chinese-made resources for April were negotiated for exports constantly. Asian butadiene market remained in an uptrend, driving up China’s trading atmosphere. Thus, the market price of butadiene in China trended up. However, in March, some downstream enterprises cut lows on high cost pressure. Available butadiene resources ramped up from last month, curbing the increment in price. Yet, on the whole, some butadiene units were planned to take maintenance intensively, so the decrement in price was minor. On March 18, prices of natural rubber and PBR futures surged, which drove up the trading atmosphere in the butadiene market. Amid bearish factors, the market price of butadiene fluctuated upwards in March.
The operating rate of downstream industries went lower, pressured by high costs.
In recent months, with China’s butadiene price rising, downstream users were under notable cost pressure. According to SCI, four major downstream sectors of butadiene faced thin profits or losses. Especially from March, the profit losses intensified. Long-term low profitability resulted in relatively low operating rates at downstream enterprises. In March, some downstream enterprises cut loads of their units. In the week ending March 14, the operating rate of the SBR industry slid to around 70%, down 5% from the annual high. The operating rate of the PBR industry was 66%, down 12% from the annual high. That of SBS and ABS sectors reached about 44% and 65%, down 8% and 8% respectively. With some downstream users reducing loads, the consumption volume of butadiene also dropped. Some enterprises with integration units even sold their butadiene, replenishing the market to some extent.
In the short run, China’s butadiene market may remain high.
In the short run, some Chinese-made butadiene resources for April are negotiated for exports. According to SCI, 3-4 ships of spot resources are expected to export in April. At present, the butadiene unit at Shenghong Petrochemical is still under maintenance. Zhejiang Satellite Petrochemical, Shandong Jinhai Chemical, Zhejiang Petroleum & Chemical Phase II and Sinopec Zhongke (Guangdong) Refinery plan to take maintenance of their units. Expected unit turnarounds may greatly bolster the butadiene market. Besides, in terms of imports, deep-sea cargoes with relatively low prices are not heard currently. Therefore, from April to May, deep-sea cargoes may hardly be replenished to the Asian market. The tight butadiene supply may buttress the Asian butadiene market, further propping up China’s market.
As seen from downstream and related products, on March 18, prices of natural rubber and PBR futures saw large rises, greatly pushing up the trading atmosphere. The spot price of natural rubber and synthetic rubber also picked up. With prices of downstream products climbing, the cost pressure on some enterprises has been eased somewhat. Yet, players should pay attention to the continuity of high prices and purchasing appetites for feedstock from tire enterprises. Other downstream sectors still face cost pressure for lack of favorable factors.
According to sources, a new 100kt/a butadiene unit in Zibo, Shandong may conduct a trial run. This new butadiene unit is not matched with downstream units. Thus, its butadiene resources may flow into the market, replenishing the spot market. Players should focus on the status of the new unit rest run and resource outflow.
On the whole, in the short run, China’s butadiene price may remain high, backed by some favorable factors. Yet, thereafter, the impact from unit maintenance may ebb, and new butadiene units may kick off, replenishing China’s domestic market. Besides, most downstream users may face certain cost pressure, so the butadiene price is expected to fall.
All information provided by SCI is for reference only, which shall not be reproduced without permission.
Please click "Read more" for the full article.
