China BD supply to grow on start-ups; demand outlook uncertain

Author: Dan Lu

2020/09/02

SINGAPORE (ICIS)--Butadiene (BD) supply in China will grow with new capacities coming on stream while the outlook on demand is uncertain, with a possible decline in production at downstream synthetic rubber market.

A combined capacity of 290,000 tonnes/year from three new plants is due to come on stream toward the fourth quarter.

China new BD capacity in 2020 (in '000 tonnes/year)

Region Producer Capacity Construction completed Remarks
Zhejiang, east China Zhejiang Petrochemical (phase one) 200 Q1 Started sales in February; running at 100% from early April
Liaoning, northeast China Hengli Petrochemical 140 Q1 Commissioned in early February, then started sales
Liaoning, northeast China Liaoning Bora LyondellBasell 140 Q3 Commissioned in early August, then started sales
Fujian, south China Sinochem Quanzhou Petrochemical 120 Q3 Supply due out in end September-early October
Guangdong, south China Sinopec Zhongke Refining & Petrochemical 120 Q3 Supply due out in October
Shandong, north China Wanhua Chemical 50 Q3 Trial runs set in October
Hubei, central China Sinopec-SK Petrochemical 60 Q4 Capacity expansion

Source: ICIS

Spot domestic BD prices have had a wild fluctuation in August, initially pulled up by strong gains in Asia but expectations of increased local supply weighed on the market.

In end-August, spot BD prices stood at yuan (CNY) 5,450/tonne, up by 13.5% from the start of the month, according to ICIS data.

ICIS Editorial Chart goes here

In northeast Asia, spot BD prices in August spiked by about 18% from end-July, the data showed, on the back of tight supply due to turnarounds at some plants and firm demand from downstream synthetic rubber and acrylonitrile butadiene styrene (ABS) sectors.

In China’s domestic market, petrochemical major Sinopec raised its EXW (ex-works) prices three times in two weeks by a total of 14.9% in August, prompting most traders to follow suit.

As the petrochemical giant was also active in purchasing spot volumes, availability of cargoes in the market decreased throughout the month.

In late August, however, new supply hit the market as Liaoning Bora LyondellBasell’s plant started producing on-spec BD and had started selling cargoes via auction.

Demand from downstream synthetic rubber producers may remain weak as they have stocked up actively in the second quarter when import BD prices were at all-time lows

Their products, however, have not been fully consumed by the downstream markets, resulting in a pile-up of synthetic rubber inventories.

BD is a raw material used in synthetic rubbers such as stytrene butadiene rubber (SBR) and polybutadiene rubber (PBR), which go into tyres for the automotive sector.

With synthetic rubber prices not tracking strong gains in BD, producers become more hesitant to purchase more raw material.

(recasts paragraph 8 for clarity)

Focus article by Dan Lu

($1 = CNY6.83)

Visit the ICIS Coronavirus topic page for analysis of the impact on chemical markets and links to latest news.