Impact of PRefChem Explosion Accident on China Butadiene Market

SCI99

2020-03-17

Impact of PRefChem Explosion Accident on China Butadiene Market

According to market news, the oil refining unit at Pengerang Refining and Petrochemical in Malaysia exploded on March 15, and the blast was under control. According to SCI, the incident mainly involves the 1,000kt/a ethylene unit and 180kt/a butadiene unit. At present, the oil refining unit and ethylene cracking unit have been shut down, and the specific shutdown duration will be paid attention to.

According to sources, some butadiene resources at PRefChem were sold to China’s market before the unit was shut down. In the early period, the transaction price of its butadiene resources was low due to the unstable product index. However, in recent days, the index of its butadiene resources is relatively stable. Thus, if the butadiene unit was shut down for a long period, the butadiene supply in Asian market will be affected.

According to SCI’s statistics, in China, the import volume of butadiene from Malaysia was relatively limited. Malaysia was not the main import origin of butadiene in China. The annual average import volume of butadiene was around 10kt, accounting for a small proportion. In 2019, the total import volume of butadiene was around 290kt in China, among which only 6kt of butadiene resources were imported from Malaysia, accounting for 2% of the total import volume. However, as the butadiene supply at PRefChem remains stable, the import volume of butadiene from Malaysia will probably move up in the coming days.

This shutdown of the cracking unit at PRefChem will have an impact on the resource supply in Asian market in Q2, 2020. In addition, in April, the butadiene unit at LOTTE Chemical will continue to be shut. Therefore, the supply side will bolster the butadiene price to some extent. The low-priced butadiene resources will slide in Asian market.

In the short term, the impact of the PRefChem explosion accident will be relatively limited on China’s butadiene market. At present, in China, the supply of butadiene resources are still sufficient, and the butadiene inventory is high at East China port. Besides, China’s butadiene units run normally. In the near future, downstream demand is still in a recovery state, and it is difficult to form a strong support for butadiene prices for the time being. However, the demand for butadiene may recover to a normal level, the inventory at East China port is consumed gradually and China’s butadiene units will take maintenance as scheduled. Bolstered by these factors, China’s butadiene prices are likely to go up. However, considering the spread of public health event, the impact on the demand side will be uncertain in the future. Market players should pay close attention to the progress of these events.

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