Oct China BD Market Heats Up on Rising Export and Unplanned Unit Hiccups
Snapshot: In October, China’s butadiene market price continued to move up, and the average price went higher from September. The synthetic rubber market underperformed in October. Yet, Chinese-made butadiene resources were exported for arbitrage. Two butadiene units were shut down unexpectedly. Thus, the spot supply of butadiene tightened, driving up domestic prices greatly. In the coming days, the support from the supply may ebb. The operating rate of downstream units may be affected by high costs.
In October, China’s butadiene market price continued to ascend.
In October, China’s butadiene market price continued to perk up. During the National Day holiday, the crude oil market remained mediocrely, affecting the trading atmosphere in the butadiene market. Besides, the price of PBR futures fell back as well, so the butadiene market trended weakly. Downstream users purchased butadiene for rigid demand. The butadiene unit at PRefchem was restarted unsmoothly. There was certain demand for butadiene in Japan and South Korea. From mid-October, some Chinese-made butadiene resources were exported for arbitrage, pushing up the domestic trading atmosphere. Besides, in October, two butadiene units were shut down unexpectedly. The spot supply of butadiene was limited, boosting the butadiene price greatly.
As of October 20, the market price of butadiene in Jiangsu-Zhejiang market was RMB 9,175/mt, up 8% from early October.
There were more export arbitrage chances on robust Asian butadiene market.
From late September, the Asian butadiene market price surged. On September 22, the closing price of butadiene was $1,050/mt (CFR China), up 16.7% from early September. The CFR China price in the recent three weeks was around RMB 300/mt higher than China’s domestic price. Heading into October, some butadiene units in Southeast Asia were shut down briefly. Low spot availability pulled up the market price of butadiene. Affected by that, some Chinese-made butadiene resources were exported for arbitrage. The spot supply of butadiene in China crashed. In October, it was heard that export orders were concluded at butadiene producers and traders in East China. The export volume of butadiene continued to warm up from last month. Most of the exported butadiene resources flowed into South Korea. Driven by rising exports, low-priced butadiene resources were hardly seen in China’s market.
Unexpected unit shutdowns greatly affected China’s butadiene market price.
In mid-October, Sinopec Shanghai Petrochemical and PetroChina Sichuan Petrochemical took planned maintenance. Yet, in mid-October, the 120kt/a butadiene unit at Fujian Refining & Petrochemical and the 165kt/a butadiene unit at Sinopec Zhenhai Refining & Chemical were shut down unexpectedly. The total butadiene output losses under unit maintenance reached over 7kt. The spot supply of butadiene in East China was tight. Some downstream enterprises purchased butadiene from the market temporarily. In the northern region, merchantable butadiene resources at butadiene producers were sparse and most of the resources were supplied to matched downstream users. Without sales pressure, the ex-works price of butadiene in Jiangsu was uplifted to RMB 9,100/mt, higher than the highest price in September. Affected by that, low-priced butadiene resources were hardly seen in the market.
Downstream consumption volume warmed up, underpinning the butadiene market.
In terms of demand, with most units’ maintenance ending, the operating rate of downstream sectors remained normal, especially the synthetic rubber industry. Enterprises showed passable production enthusiasm, so the demand for butadiene advanced from the early days. Yet, several ABS and SBS units were shut down, affecting the butadiene consumption. Overall, the consumption volume of butadiene in October is expected at around 410kt, up 2.5% M-O-M.
The market price of butadiene in November and December may head down.
In the coming days, planned butadiene unit maintenance may pare down, so the support for price may wane from the supply. In November and December, only the 180kt/a butadiene unit at CNOOC and Shell Petrochemicals and the 100kt/a butadiene unit at Sinopec Maoming Company may take turnarounds. Other butadiene units may run normally. China’s butadiene supply may warm up. It is estimated that the butadiene output may be at a yearly high.
In terms of demand, the butadiene price is high at present. Apart from the synthetic rubber sector, other downstream industries face losses. Due to unfavorable profits, the production enthusiasm may be capped. In November, some downstream enterprises may cut load or halt production. Thus, the consumption volume of butadiene may decline. Yet, some shut units are predicted to be restarted. On the whole, the support from the demand may weaken.
In terms of the export market, with the butadiene price rising, foreign downstream enterprises may show limited acceptance of high-priced butadiene. Thus, the export market may have a weaker impact on China’s domestic market. However, the expected dip in imported shiploads may bolster the butadiene price from the bottom.
On the whole, supply and demand may lend weaker support to the butadiene price. The market price of butadiene is expected to inch down in the short run.
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