China BD demand softens on operating rates cut at downstream units

Author: Alex Feng

2019/08/14

SINGAPORE (ICIS)--Chinese butadiene (BD) demand is expected to soften as downstream sectors cut operating rates due to cost pressure.

In a rare occurrence BD price approached or briefly exceeded that of downstream products; styrene butadiene rubber (SBR) and polybutadiene rubber (PBR) in early August, forcing downstream players to rethink buying BD.

According to ICIS data, BD spot market weekly prices were assessed at CNY10,500-10,900/tonne DEL (delivered) east China on 9 August, while SBR1502 and PBR were at CNY10,500-10,850/tonne and CNY10,650-10,950/tonne ex-warehouse (EXWH) respectively.

Some market players said that recently BD and synthetic rubber market followed different trends, leading to this unusual situation.

BD maintained a short-term uptrend strong on limited supply, whereas the synthetic rubber market came under pressure because of higher BD costs.

BD supply tightened on the back of unexpected shutdowns of some domestic plants and weaker run rates at some units.

Market uncertainly was further supported by the non-ending trade spat between China and the United States.

Downstream Chinese synthetic rubber market was dragged down by the low price of natural rubber (NR) and sluggish performance of downstream tyres and automobile industry.

2019 Q3 China BD plants shutdown  

Company Capacity (kt/yr) Date Comment
PetroChina Liaoyang PC 30 5 June-30 July
Bluestar 50 25 June-16 July Unplanned
PetroChina Jilin PC 189 11 July-22 July Unplanned
Huayu Rubber 100 14 July-Unknown Short of feedstock
Sinopec Wuhan PC 120 In mid-July Unplanned shut 5 days
PetroChina Dushanzi PC 170 H2 July-H2 September
Shanghai Secco 180 28 July-30 July Unplanned
Sailboat 100 30 July–mid August For 10-14 days

China's new producer, Nanjing Chengzhi started trial runs at its 100,000 tonne/year BD plant at the end of July.

On August 11, the butene-to-butadiene plant, built by Wison Engineering, produced on-spec BD, but commercial availability is yet to be announced.

Another new BD producer, Jiutai Energy Group, started providing product for the local spot market from May 2019. The 70,000 tonne/year BD unit is running at lower operating rate.

The domestic supply tightness is also accompanied by a contraction in import volumes of BD.

According to the ICIS Supply & Demand Database, China’s BD imports decreased by 53% month on month to 14,126 tonnes in June 2019.

Some industry sources expect that imports would remain low through July and August, based on high import prices.

2017- June 2019 China BD import

Click here for more analysis.

While BD gained on supply tightness, SBR and PBR were dragged lower by competitor NR and further downstream markets.

SBR1502 were assessed at CNY10,700-10,850/tonne EXWH, while PBR at CNY10,850-10,950/tonne EXWH on 12 August, ICIS data showed.

According to market players, at the same time, spot prices of NR were at CNY10,700-10,800/tonne EXWH.

According to the China Association of Automobile Manufacturers (CAAM), for the first half, the accumulated production and sales were 12.132 million and 12.323 million, down 13.7% and 12.4% respectively year on year.

From August, synthetic rubber factories would have further production cuts due to cost pressure.

2019 Q3 China SBR & PBR plants shutdown  

Product Company Capacity (kt/yr) Date Comment
SBR PetroChina Jilin PC 150 12 July-24 July
Shen Hua Chemical 180 End August-Early September 10 days
PBR Hipro New Material 60 25 May-2 July
TSRC-UBE 72 26 June-15 July
Hipro New Material 60 13 July-17 July Unplanned
Transfar 100 14 July-22 July
PetroChina Dushanzi PC 30 20 July-20 September
Xinjiang Land 50 20 July-September 50-60 days

($1 = CNY7.07)

Focus article by Alex Feng

ICN