Price and market trends: Higher Feb BG imports may limit upside to China prices

04 April 2014 09:33 Source:ICIS Chemical Business

China imported 16,537 tonnes of BG in February 2014, a 14% increase from the same period in 2013

Higher February 2014 butyl glycol (BG) imports may cap the upside to prices into China, market sources said on 27 March.

Spot BG prices into China settled 0.3% lower week on week at an average of $1,420/tonne CFR China for the week ended 26 March, according to data collated by ICIS. The prices have declined by 2.7% since early February, ICIS data showed.

Persistently high inventories in recent months and slower-than-expected recovery in post-Lunar New Year holiday demand from the downstream coating sector have extended the downtrend in domestic prices in China, paving the way for lower-priced spot BG deals.

Higher imports in February 2014 threaten to derail the recovery in demand as the historical peak coating season got under way.

Coating demand typically peak in the northern hemisphere spring, according to market sources.

“[BG] prices are unlikely to rebound in the near term because inventories are much too high. There is no shortage of material anywhere,” said an importer.

Slackening manufacturing activity, tighter credit supply, along with the fluctuating yuan/US dollar exchange rates pose further challenges for importers whose trading losses were already deepened by the sudden depreciation in late-February.

“We have not purchased replacement cargoes in months, and we have no plans to book fresh supplies in the near term,” a separate Chinese importer said.

The yuan-denominated domestic BG prices in east China declined to yuan (CNY) 10,800-10,900/tonne ex-tank by late March from CNY11,000-11,200/tonne ex-tank in late February, according to information collated by ICIS. Even though spot BG prices have remained capped in recent months by a supply overhang, China’s February 2014 imports showed an increase from the previous three months.

China, a net BG buyer, imported 16,537 tonnes of BG in February 2014, a 14% increase from the same period in 2013, the country’s customs data showed.

The country purchased 10,670 tonnes of BG from abroad in January 2014, 6,633 tonnes in December 2013 and 7,508 tonnes in November 2013. The weak market conditions in China also prompted a small number of importers to explore opportunities to re-export their cargoes to nearby markets, such as southeast Asia.

In view of the fragile supply-demand fundamentals, a US producer said that it decided to reduce its supply volumes to China in the coming months. For material loading in March, the producer sold 1,000 tonnes to China, down from its typical monthly volume of 2,000-2,500 tonnes.

The measure should help to ease the inventory build that has limited the upside to prices in recent months, the same US producer said, adding that the impact should only become evident from May because of the longer time it takes to ship product to Asia from the US.

By Trisha Huang