China BG prices may extend gains on domestic price run-up

25 August 2016 04:00 Source:ICIS News

BG is a solvent used in paints

MELBOURNE (ICIS)--Spot butyl glycol (BG) prices into China may extend recent gains on the back of a domestic market rally and higher raw material prices, market participants said on Thursday.

CFR (cost & freight) China BG prices have amassed gains of 7.4% in the eight weeks ended 24 August to settle at an average of $910/tonne CFR China on a zero antidumping duty (ADD) basis, subject to import duty, data compiled by ICIS showed.

The prices began to recover in early July from a seven-week slump that wiped 9.1% off the value of spot prices, ICIS data showed.

Spot BG prices may head higher, fuelled by the loftier propylene and ethylene prices further upstream and the strong domestic BG market gains, several market participants said.

In northeast Asia, ethylene prices have climbed 6.6% in the two weeks ended 19 August. Propylene prices in northeast Asia added 6.9% over the same two week period, ICIS data showed.

“[International] producers are all targeting higher prices for their next sale,” a Chinese BG importer said.

A South Korean BG producer’s spot price proposal advanced to $1,000/tonne CFR China, the equivalent of $950/tonne CFR China for dutiable material. South Korean and Malaysian BG is exempt from import tariff in China under a Free Trade Agreement.

On the domestic front, spot BG prices China registered steep gains in the past week.

Spot prices of imported BG in east China surged to CNY8,300/tonne ex-tank on 24 August from CNY7,700-7,800/tonne ex-tank a week ago.

Offers prevailed CNY8,400-8,500/tonne ex-tank, according to input from market participants.

Some Chinese importers attributed the market rally to a domestic BG producer’s price hike measures on the back of higher raw material n-butanol (NBA) prices.

However, the reality of limited existing inventories and the paucity of lower-priced spot offers are further contributors to the domestic price run-up, some importers pointed out.

“We expect the prices to rise further because existing inventories of both locally-produced and imported BG are quite tight,” a separate Chinese importer said.

A number of importers said that domestic producer Dynamic (Nanjing) Chemical’s BG plant operating rate must be fairly low because of the producer’s limited supply volume, even though a company source at Dynamic reported the contrary.

The fact that east China BG prices could rise unimpeded in the past week is evident of the limited supply from Dynamic, the importers said.

However, the domestic price run-up may also lead to a gain in forward supply, as the corresponding increase in US dollar-denominated import parity prices lures more international producers to offer spot cargoes to China, the second importer cautioned. 

China, Asia’s biggest BG importer, purchased 80,603 tonnes in the first six months of 2016, a 33.1% increase from the first half of 2015, according to the country’s Customs data.

BG, derived from ethylene oxide (EO) and NBA, is also known as ethylene glycol ethers (EGE).

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

Focus article by Trisha Huang

By Trisha Huang