OUTLOOK '12: China BDO capacity to surge, room for export

04 January 2012 02:26  [Source: ICIS news]

By Quintella Koh

SINGAPORE (ICIS)--China’s butanediol (BDO) capacity is expected to more than double to about 739,000 tonnes/year by the end of this year, from 291,000 tonnes/year in 2011, as the country is set to turn from a net importer to exporter by 2013, industry sources said.

Most of the world-scale projects that are coming on stream are under construction in the country’s western region, according to Chemease, an ICIS service in China.

Xinjiang Markor Chemical is scheduled to bring on stream its 100,000 tonne/year plant in Xinjiang at the end of 2012 or early 2013. The company plans to export a portion of its BDO output, a source involved with the project said this week, with exports possibly going to southeast Asia. Xinjiang Markor operates a 60,000 tonne/year BDO plant at the same site.

Shaanxi Shanhua is expected to complete construction of its 100,000 tonne/year plant at Weinan in Shaanxi in late 2012. The company runs a 30,000 tonne/year BDO plant at the same site.

Shanxi Sanwei Group will increase its BDO capacity at Hongdong in Shanxi province from 150,000 tonnes/year to 250,000 tonnes/year. The company has begun expansion works at the plant and expects to complete construction by the second half of 2013.

China is a key importer of BDO in the Asia-Pacific region, but by 2013, the country likely to attain self-sufficiency and could start actively exporting BDO.

China’s BDO imports reached 487,000 tonnes in 2009 and peaked at 642,000 tonnes in 2010.

However, its imports declined in 2011 and are expected to continue falling this year, Chemease data shows.

China is estimated to have imported 540,000 tonnes of BDO in 2011, and this figure will decline to 430,000 tonnes in 2012, according to Chemease data.

Regional producers expect prices to fall as a result of the large capacity expansion, while fundamentals in the BDO market remain lacklustre.

BDO prices have plunged to a nine-month low as a result of a regional supply overhang and weak demand.

Prices were at $2,200-2,250/tonne (€1,694-1,733/tonne) CFR (cost & freight) CMP (China Main Port) on Tuesday, down by $100-150/tonne from the previous week, according to ICIS data (please see graph below).

“The BDO market, without China’s new capacity, is already in the doldrums this year. It is hard to imagine how far prices will fall, and how other producers in the Asia-Pacific region can survive, once China’s new capacities are brought on stream,” said a northeast Asian producer.

The main reason for the poor performance in the BDO market is the cooling down of China’s once red-hot property market, after the government passed a tough round of credit tightening policies from April.

These measures include higher down payments, limits on home ownership and the introduction of a property tax in some cities.

BDO is used heavily in the construction sector, and a weakening real estate segment could quickly cool off demand for BDO and its derivatives, and affect its prices.

In November, prices fell in 49 out of 70 monitored cities for newly built residential properties from a month earlier, while prices in another 16 cities remained unchanged, according to figures released by the National Bureau of Statistics earlier in December.

China will maintain its policies on the property market next year to return housing prices to a reasonable level, according to an announcment at the country's central economic work conference earlier this month.

Industry sources are expecting prices to continue on its downward spiral in the first quarter as a result of a regional glut in spot cargoes.

($1 = €0.77)

For more on BDO, visit ICIS chemical intelligence 
Please visit the complete
ICIS plants and projects database
Read John Richardson and Malini Hariharan’s blog –
Asian Chemical Connections

By: Quintella Koh
+65 6780 4372

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