China BDO market to gain further support from tight supply

Author: Jady Ma

2020/08/20

SINGAPORE (ICIS)--China’s butanediol (BDO) prices saw a long-awaited rally in August on tightening supply after over a month of narrow fluctuations, and this may sustain in the short term.

The supply tightness is mainly in Xinjiang, where multiple plants are either running at low rates or under maintenance shutdowns. This has tightened spot supply and affected deliveries of contractual cargoes in Xinjiang.

Xinjiang Markor’s phase I and phase II units with a combined capacity of 160,000 tonnes/year are running at only 60% because of heat exchanger maintenance and are expected to ramp up production in mid-to-late September.

Its 100,000 tonne/year phase III project, a joint venture with BASF, has suspended sales to the market because of cost issues, and is only supplying BDO to its downstream polytetramethylene ether glycol (PTMEG) unit.

Lanshan Tunhe shut its two BDO units with a total capacity of 204,000 tonnes/year for maintenance on 5 July and is preparing to resume operation in the near term.

Local deliveries in Xinjiang are delayed because of the resurgence of coronavirus infections.

Xinjiang Guotai’s two BDO plants, each with 100,000 tonnes/year of capacity, are also facing unstable operations, affected by feedstock supply issues.

These plants account for 31% of total BDO capacities in mainland China, and thus have a notable impact on the market.

On 18 August, domestic BDO producers posted an average operating rate of 44.1%, still far below the typical level of 60%.

Short supply has motivated domestic BDO producers to push up offers several times.

Downstream producers, however, are not keen to accept higher prices.

Some traders meeting with buying resistance at high prices are moving cargoes at relatively low levels, according to some market participants. The price growth is slow as a result.

On 19 August, average prices for bulk BDO cargoes in east China were at yuan (CNY) 7,750/tonne, up by 2.6% from 3 August, ICIS data showed.

ICIS Editorial Chart goes here

Cargo-holders sold at relatively low prices to lock in some profits, as their costs are low in August, a BDO producer said.

However, if costs go up when the new settlement period arrives in late August, they may no longer be keen to deal at the same prices.

Downstream polybutylene terephthalate (PBT) producers are still running their plants at 55-60% and may raise their run rates in late August. The industry is likely to find support from recovering spinning demand.

Sales of downstream PTMEG have somewhat improved, though the prices are slowly moving down.

Downstream gamma-butyrolactone (GBL) producers are seeing stable operations amid heathy demand from the n-methyl-2-pyrrolidone (NMP) sector.

The BDO export market is weak. BDO exports from China are still curbed by sluggish demand from Europe.

Although outflows to southeast Asia increased slightly, this is mainly because cargoes from other origins are not as price competitive.

Focus article by Jady Ma

Photo: Butanediol is a chemical intermediate used in the production of polymers, solvents and fine chemicals. (By Aimee J Santos/Shutterstock) 

ICN