China Butadiene Market to Face Headwinds in H2 After H1 Inverted V-Shaped Trend
Snapshot: In H1, 2023, China’s butadiene market first perked up and then dwindled. Propped up by expected intensive units’ maintenance and rising demand, the market price of butadiene in China surged in Q1. Yet, the actual demand recovered slowly, and China’s butadiene price crashed in Q2, especially in June when the price hit an annual low. In H2, 2023, the demand for butadiene may revive, but the supply may stay high. Besides, foreign butadiene resources are likely to be replenished to China’s market. Therefore, China’s butadiene price may face headwinds in H2, 2023.
In H1, 2023, China’s butadiene market showed an inverted V-shaped trend against strong expectations but weak reality.
In H1, 2023, China’s butadiene market price descended after going up, and its decrement was larger than the increment. Thereinto, the price trend in Q2, 2023 deviated from that in the 2022-2023 China Butadiene Market Annual Report, which was mainly due to the changes in predicted demand. In Q2, 2023, the consumption volume of butadiene in Europe, the U.S. and Southeast Asia dropped notably, stemming from poor foreign demand. The influx of this part of foreign resources greatly subdued China’s butadiene market, leading to the price crash in Q2.
In Q1, 2023, China’s butadiene market price kept high. In end-2022, due to the expected commissioning of the new butadiene unit, traders and downstream users registered thin appetites for replenishment. Yet, the supply release of the new unit was postponed, whilst the demand for butadiene from the adiponitrile sector saw notable increments. Therefore, the market price of butadiene surged despite the Spring Festival Holiday. In the coming periods, with the demand gap in South Korea, negotiations on Chinese-made butadiene resources exports remained active, strongly shoring up China’s butadiene market. Besides, boosted by expected units’ turnarounds in Q2, the market price of butadiene in China went higher constantly. In mid-February, the market price of butadiene reached RMB 9,900/mt, which peaked in H1, 2023.
From March, some fresh butadiene capacity was released, and sufficient supply weighed on the market price of butadiene. Besides, after the May Day holiday, batches of Asian butadiene resources were merchantable in the market, greatly impacting China’s market. In Q2, 2023, China’s butadiene market remained in a downtrend. In late June, the butadiene price flipped to a yearly low at RMB 5,850/mt, which also notched a new low from early 2022. According to SCI, from January to June 2023, the butadiene price in the Jiangsu-Zhejiang market averaged RMB 8,262/mt, down 12% Y-O-Y. On June 30, the butadiene price in the Jiangsu-Zhejiang market closed at RMB 6,650/mt, down 12% from early 2023.
In H1, 2023, China’s butadiene market fluctuated beyond players’ expectations. The butadiene price saw notable declines due to rising supply but weak demand.
Expected intensive units’ maintenance and exports pushed up China’s butadiene price in Q1, 2023.
In Q2, 2023, China’s butadiene units took maintenance intensively. In terms of the turnarounds in 2023, the monthly output losses of butadiene hit the highest from May to June. In early 2023, expected units’ maintenance strongly bolstered the butadiene market in Q1. 2023 witnessed centralized butadiene units’ turnarounds, especially in Q2. The butadiene units in Q2 encountered relatively long-period maintenance, covering Sinopec Zhenhai Refining & Chemical, PetroChina Liaoyang Petrochemical, Shenhua Ningxia Coal Industry, Shenhua Ningxia Coal Industry, Zhejiang Petroleum & Chemical, Sinochem Quanzhou Petrochemical, Wanhua Chemical Group, Shanghai Secco Petrochemical, etc. Besides, in Q2, foreign butadiene units were also shut down for maintenance intensively. The demand for spot butadiene in South Korea ramped up. Driven by that, the export volume of butadiene in China headed up notably in Q1. From January to May 2023, the export volume of butadiene in China reached 41.6kt, up 77% Y-O-Y, boosting the butadiene market in Q1.
Ample output and imported shiploads weighed on China’s butadiene price.
According to SCI, from January to June 2023, China’s butadiene output totaled 2,160kt, and the import volume was predicted at around 180kt. The butadiene supply reached 2,340kt, up 12% Y-O-Y. In H1, 2023, a total of 5 new butadiene units came on stream and the new capacity was mainly released in Q2, replenishing China’s butadiene supply greatly.
In terms of imports, some of China’s downstream enterprises enhanced the consumption of imported resources. Besides, available foreign resources leveled up from Q2. Thus, in H1, 2023, the import volume of butadiene in China trended up notably. Especially, after the May Day holiday, batches of low-priced butadiene resources flowed into China’s market, greatly weighing on the butadiene price in Q2.
In terms of demand, some new downstream units came online, and the operating rate of the adiponitrile sector warmed up overall. From January to June 2023, the total consumption volume of butadiene in China stood at 2,150kt, and the export volume was estimated at 47kt. The total demand for butadiene reached 2,197kt, up 8.6% Y-O-Y. The increment in demand was lower than that in supply, failing to bolster the butadiene price from fundamentals. As seen from China’s downstream consumption, the consumption volume of butadiene from the adiponitrile sector extended gains Y-O-Y. Besides, with the release of new ABS capacity, the butadiene consumption from the ABS sector advanced. Yet, the butadiene consumption from the synthetic rubber industry went lower slightly, due to output decline caused by units’ maintenance.
In H2, 2023, China’s butadiene market will mainly be affected by its own supply and demand fundamentals. However, as butadiene is a by-product of the ethylene cracker, the profitability of the main product of the cracker will also affect the supply of butadiene. The trend of the macro trend and crude oil prices may have impacts on the butadiene market as well.
Newly added butadiene units may be limited but imported shiploads may replenish to the market.
In terms of China’s market, in H2, 2023, newly added butadiene capacity may be limited. Fresh butadiene units in 2023 have already been released in H1. At present, the butadiene unit at Sanjiang Chemical runs normally. In H2, 2023, several new butadiene units are scheduled to achieve intermediate handover, but the output may be released in early 2024. Besides, after intensive units’ maintenance in Q2, the number of butadiene units under maintenance may decline in Q3. Yet, in Q4, some butadiene units may take maintenance, but the overall maintenance impact may weaken from Q2. It is estimated that the monthly output losses are expected to be over 20kt, slightly bolstering the butadiene market somewhat.
In terms of import, with foreign butadiene unit maintenance ending in Q2 and planned commissioning of new capacity, merchantable butadiene resources may be sufficient in foreign markets, replenishing China’s butadiene market. The butadiene units in South Korea, Japan and Southeast Asia mostly took maintenance in H1, 2023, especially in Q2. Thus, after Q2, these butadiene units may resume normal supply. Besides, the new butadiene unit in Vietnam is planned to kick off, pulling up the supply in the market.
The demand may continue to recover, underpinning the butadiene price.
In H2, 2023, end demand may continue to revive. According to the real estate sector, the floor space of completed buildings may level up, which will be beneficial to industries such as home appliances. The production and sales of automobiles may remain in an uptrend, driving up the demand for tire. On the whole, bolstered by end demand, newly added downstream units in H2, 2023 are likely to go into production. Therefore, the consumption volume of butadiene may float up, and the support from the demand for butadiene price in H2, 2023 may be enhanced from H1, 2023.
It is expected that China’s butadiene market may fall after inching up in H2, 2023.
According to the data from previous years, the butadiene price is likely to rise in Q3, during which Q2 and Q3 generally see intensive maintenance of butadiene units. Besides, accidents are likely to occur in summer. The demand for butadiene in September and October may rally. Bolstered by the above factors, the market price of butadiene may head up. In Q4, due to resuming supply and slack demand, the market price of butadiene will probably drop. In 2023, against a sagging market in Q2, the butadiene market price is likely to move up in Q3. However, in Q4, some of China’s butadiene units may take turnarounds and the demand may see further recovery, so the decrement in butadiene price may be limited.
In terms of the overall macro trend in H2, 2023, with end demand recovering, its support for the butadiene price may advance from H1, 2023. However, considering that the overall supply may be still sufficient, and the actual demand recovery status remains uncertain, the increment in butadiene price may be limited, hardly breaking the highest price in H1. The average price of butadiene in H2 may be lower from H1. As seen from the current price trend, SCI revises the price forecast in the 2022-2023 China Butadiene Market Annual Report. Affected by slow demand recovery, the commissioning time of newly added downstream units may be postponed. Thus, the actual increment in butadiene consumption may be minor. According to the characteristics of seasonal fluctuations, the highest price of butadiene in H2 may occur in September, and the butadiene price may linger at RMB 6,500-8,500/mt. In the butadiene market, players should pay attention to that overseas economic growth may face an unexpected decline or even recession and the imported shiploads may be higher than expected.
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