China's Butadiene Price Decreased as Self-Sufficiency Increased

China's Butadiene Price Decreased as Self-Sufficiency Increased

In 2019, China’s butadiene market was largely in line with the players’ expectations. With the increase in the degree of self-sufficiency, China’s butadiene market still saw small fluctuations constantly. The detailed butadiene market analysis will show in the following aspects.

1. The fluctuating extent of the butadiene market narrowed, and the average price continued to move down.

As seen from the butadiene market price from 2017 to 2019, China’s butadiene market price continued to move down in 2019 and fluctuated within RMB 7,800-13,100/mt. The average market price of butadiene was RMB 9,556/mt in 2019, down 16.37% Y-O-Y. In 2019, China’s butadiene market price first fell, then rallied and finally dropped. The lowest butadiene market price appeared in April, while the highest one appeared in September. Within this year, the fluctuating extent of butadiene market price narrowed from previous years. Especially from April to July, China’s butadiene market price trended sideways and saw slighter fluctuations from H2 of 2019.

2. The degree of self-sufficiency improved as newly added butadiene units went into production in succession.

In 2019, China’s total butadiene capacity reached 4,059kt/a, up 170kt/a Y-O-Y. It was mainly because the 70kt/a unit at Jiutai Energy Inner Mongolia and the 100kt/a unit at Nanjing Chengzhi Yongqing Energy Technology were put into operation. In 2019, with newly added capacity being released, China’s butadiene output increased to around 3,000kt, up 8.7% Y-O-Y. Meanwhile, the Import dependence degree of butadiene declined somewhat. The import volume of butadiene was estimated at around 280kt, down 7.3% Y-O-Y. China’s butadiene self-sufficiency degree continued to increase.

3. Downstream demand saw constant increases, and the operating rate went higher.

In 2019, China’s butadiene demand remained in an uptrend. According to SCI’s statistics, in 2019, China’s butadiene demand nearly reached 3,300kt, up 5.48% from last year. Within this year, as the butadiene prices were low in Q2 and Q4, the operating rate of downstream industries was high and even went higher to over 60%, up 3%-6% Y-O-Y. The operating rate of other industries was relatively stable.

4. The profit at downstream enterprises improved.

Recently, with China’s butadiene supply increasing gradually, the overall butadiene price moved down. The profit at butadiene producers declined compared with that in early days. The industrial profit moved down to downstream industries obviously. According to SCI’s statistics, in 2019, the annual theoretical profit of C4 extraction units was around RMB 3,300/mt, down 18.5% Y-O-Y. The annual theoretical profit of SBR industry was around RMB -1,275/mt and that of PBR industry was RMB -1,284/mt. In 2019, the losses of synthetic rubber industry decreased from last year.

5. Big ethylene units went into production in succession, and the supply increased rapidly.

Recently, as the ethylene unit at Zhejiang Petrochemical has been successfully tested run, the newly added ethylene unit at Hengli Petrochemical will be tested run in the near future. Meanwhile, Sinopec-KPC (Guangdong) Refinery & Petrochemical and Sinochem Quanzhou Petrochemical has completed the intermediate handover of their projects. The petrochemical project at Liaoning Bora Petrochemical will enter the tail stage. A large number of ethylene units will go into production, so the butadiene capacity will see rapid growth. According to SCI, in 2020, a total of 780kt/a butadiene units will be put into operation. At that time, China’s butadiene capacity will reach around 5,000kt/a. The supply will improve obviously. In the future, there will be many newly added butadiene units going into production, and the butadiene supply will be more sufficient.

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