FocusAsia BDO may soften further on weak demand, high inventory

15 November 2012 04:20  [Source: ICIS news]

By Judith Wang

BDO is a chemical intermediate used in the production of polymers, solvents and fine chemicals.SINGAPORE (ICIS)--Spot butanediol (BDO) prices in Asia will likely fall further in the coming weeks on softening demand as the peak manufacturing season in the key China market draws to a close, while sellers and buyers are saddled with high inventory of the material, market sources said on Thursday.

Bulk BDO values in the region have declined by about 7% from mid-October to $1,950-2,050/tonne (€1,541-1,620/tonne) CFR (cost and freight) CMP (China Main Port) on 13 November, according to ICIS.

In the key China market, domestic BDO prices have also shed 5% to yuan (CNY) 14,800-15,200/tonne ($2,376-2,440/tonne) DEL over the same period, ICIS data showed.

Most market participants attributed the decline in prices to dwindling demand and soft purchasing power of end-users.

At the recent Canton Fair in China, the turnover generated at $32.68bn from 15 October to 4 November was 9.3% lower compared with the previous fair held on 15 April-5 May.

Canton Fair is China’s largest semiannual trade fair, with the transactions concluded at the event widely regarded as a barometer of the country’s foreign trade.

“The peak manufacturing season is closing now. We don’t have enough orders, so we naturally slowed down the procurement for feedstock BDO,” a downstream polybutylene terephthalate (PBT) producer said.

The global economic slowdown and weak demand from downstream rigid polyurethane (PU), polybutylene terephthalate (PBT) and polytetramethylene ether glycol (PTMEG) industries significantly weakened the consumption of BDO, market sources said.

Consequently, regional BDO producers and suppliers with high inventory are being forced to lower their offers to generate sales, market sources said.

Most buyers and end-users are unwilling to build more stocks amid the year-end destocking activities, which may weigh on the market further.

Supply, on the other hand, will get a boost by yearend, with the scheduled start-up of Sinopec Yizheng Chemical Fibre Co’s 100,000 tonne/year plant in China and may also exert further downward pressure on BDO prices, market players said.

“We are not rushing to buy cargoes now because we are expecting prices to fall further in near term,” a downstream user said.

BDO is a chemical intermediate used in the production of polymers, solvents and fine chemicals.

($1 = €0.79 / $1 = CNY6.23)

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By: Judith Wang
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