China BDO extends gains in September on tight supply, strong demand

SINGAPORE (ICIS)–China’s domestic butanediol (BDO) prices have risen for the second straight month in September on the back of tight supply and strong demand.

Spot prices of bulk BDO cargoes in east China were assessed on 22 September at around yuan (CNY) 8,450/tonne DEL (delivered), up by around 12% from early August, ICIS data showed.

Supply in September increased as some plants have completed turnarounds, but their average run rate remained relatively low at about 60%.

Interactive content by Ran Cheng

Tight supply as a result of plant turnarounds and transport restrictions in Xinjiang due to a resurgence of coronavirus infections in the region, boosted BDO prices in August.

The current average run rate of domestic BDO plants is at their highest since March 2020, with the restart of Inner Mongolia Dongyuan’s 100,000 tonne/year BDO plant.

In the northwestern Xinjiang region, which accounts for around 43% of China’s total BDO capacity, transportation was disrupted in late July to August, but has since returned to normal.

Currently, contract supply was largely stable, while spot supply remained tight as most BDO producers kept low inventories and controlled spot sales, according to a downstream buyer in east China.

Demand was strong amid stable and sound performance of BDO’s three major downstream sectors – polytetramethylene ether glycol (PTMEG), butyrolactone (GBL) and polybutylene terephthalate (PBT).

PTMEG prices have increased gradually as sales were boosted amid low inventories and higher prices of derivative spandex, prompting producers to raise output, which meant increased BDO consumption.

GBL production was also ramped up on robust demand for its derivative n-methyl-2-pyrrolidone (NMP), recently supported by more orders for lithium batteries.

A few GBL producers, however, were incurring heavy losses because the increase in their product prices lagged behind gains in feedstock BDO.

In the PBT sector, plants remaining running at above 60% due to healthy demand from downstream engineering plastics and spinning sectors, although some producers are afflicted with negative margins in September.

Chinese producer Zhejiang Meiyuan plans to restart its 100,000 tonne/year PBT plant at the end of September, market sources said.

Demand for BDO will increase in the short run but will be tempered by production losses at some downstream segments.

Domestic BDO supply, on the other hand, will get a boost as Shaanxi Yanchang Petroleum’s 100,000 tonne/year plant began trial runs around mid-September and is expected to achieve on-spec production in October.

Focus article by Jady Ma

($1 = CNY6.82)

ICN

Photo: Volunteers disinfect and sterilize to fight the coronavirus outbreak in Urumchi, Xinjiang, China – 26 Aug 2020. (Source: Top Photo Corporation/Shutterstock)

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