China BDO prices to weaken on supply pressure

SINGAPORE (ICIS)–Spot prices of 1,4-butanediol (BDO) in China are expected to come under pressure in the second-half of February following the Lunar New Year holiday, as the market is awash with supply.

(Source: ROMAN PILIPEY/EPA-EFE/REX/Shutterstock)

Chinese producers maintained relatively high stock inventory amid poor offtake due to the Lunar New Year holiday on 4-10 February.

Buying interest dwindled since mid-January as most downstream end-user plants in China ceased production ahead of the holiday.

Average operating rate of BDO plants in China dropped steadily to 58.1% in early February from 72.4% in early December, before recovering to 67.9% on 12 February, according to ICIS.

Meanwhile, the average operating rate of downstream polybutylene terephthalate (PBT) plants in China dipped slightly by 5% to 65% during the holiday period, based on ICIS.

Downstream Spread – BDO and Asia

The following chart shows the spread between BDO CFR (cost & freight) China and prices of polybutylene terephthalate CIF (cost, insurance & freight) NE (northeast) Asia prices.

From the chart, downstream PBT producers recorded lower margins since January.

Import prices of bulk BDO in the week ended 12 February were assessed unchanged at $1,450-1,500/tonne CFR CMP (China main port), and were flat at $1,550-1,650/tonne CFR SE (southeast) Asia, according to ICIS data.

China’s domestic prices for BDO inched down by yuan (CNY) 100/tonne ($14.77/tonne) at the low end of the range to CNY9,000-9,400/tonne DEL (delivered) China in the same period, ICIS data showed.

However, from their vantage point, market players are bracing for improvement in fundamentals as they are hopeful that prices would bottom out in March with the approach of the peak demand season.

A southeast Asia-based producer is targeting substantial hikes of $100-150/tonne for its February export prices, citing generally firm prices of feedstock maleic anhydride (MA), but the full extent of the hikes will likely be difficult to achieve as they are expected to be met with resistance from buyers.

At present, northeast Asian producers and a US producer have largely maintained their February offers amid poor market sentiment.

In addition, expectations of stable feedstock prices of butadiene (BD), propylene and propylene oxide (PO) could provide a fillip to the BDO market if BDO prices were to rise.

Focus article by Matthew Chong