China to grapple with BDO surplus for two years - Shanxi Sanwei

16 March 2012 07:56  [Source: ICIS news]

NANJING (ICIS)--China will have to grapple with surplus supply of butanediol (BDO) for the rest of this year through 2013, an official of Chinese BDO major Shanxi Sanwei Group said on Friday.

China’s BDO production this year will average 580,000 tonnes, while domestic consumption is projected to reach 520,000 tonnes, said Fu Kai Hui, Shanxi Sanwei assistant head of commercial sales, at CBI’s 9th Polyurethane Resin and Raw Materials Summit in Nanjing, Jiangsu.

This is a stark contrast from the industry’s sterling performance last year.

Fu, in a slide presentation, showed that China consumed 360,000 tonnes of BDO in 2011 against actual production of 270,000 tonnes.

Most of China’s BDO shortfall was covered by BDO imports from South Korea, Taiwan, Japan and the eurozone, Fu said.

The outlook for China’s BDO market is equally grim next year, said Fu, with production expected to hit 1.02m tonnes against the projected sales of 760,000 tonnes.

This implies that Chinese BDO producers will have to scale back on their BDO run rates through next year, given the wide difference between the projected output and demand.

The decline in BDO demand can be attributed to the weak performance of key downstream gamma-butyrolactone (GBL) and polybutylene terephthalate (PBT) sectors, Fu said.

GBL is commonly used in the production of paint strippers and glue removers, while PBT is used primarily in the production of electrical parts.

These downstream sectors are heavily reliant on the Chinese real estate sector, where sales have been slowing down since the start of this year, Fu said.

Premier Wen Jiabao said on 15 March that the China’s home prices are far from a reasonable level, denting hopes real estate curbs will be eased.

BDO sales will only overtake its production volume in 2014, added Fu of Shanxi Sanwei - the biggest BDO producer in China.

Fu forecasts that China’s BDO sales to hit 1.18mm tonnes, while total output is expected to reach 1.16m tonnes.

By: Quintella Koh
+65 6780 4372

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