China BDO rebounds as producers cut output amid supply glut

Focus article by Judith Wang

SINGAPORE (ICIS)–Spot domestic prices of 1,4-butanediol (BDO) in China rebounded as producers have started cutting production, but gains may be capped because of weak demand, industry sources said on Friday.

On 12 May, BDO prices increased by yuan (CNY) 200-300/tonne from the previous week to yuan (CNY) 8,300-8,600/tonne DEL (delivered) China, according to ICIS data.

Prices had fallen by 12% since the start of the year because of a supply glut and poor downstream demand, the data showed.

Shrinking margins, as well as soft demand from downstream polytetramethylene ether glycol (PTMEG) and polybutylene terephthalate (PBT) sectors, have been prompting major Chinese producers to shut down their BDO plants, industry sources said.

“The prevailing BDO prices are already below our production cost. If we don’t shut down plant, we will lose more money,” a major BDO producer said.

Shaanxi Shanhua Chemical Group’s BDO plants with a combined capacity of 130,000 tonnes/year in northern China were taken off line on 27 March, with no definite restart date.

In the southwestern province of Sichuan, a 60,000 tonne/year plant operated by Sichuan Tainhua was taken off line in late April.

Guodian Sinopec Ningxia Energy Chemical, meanwhile, shut down its 100,000 tonne/year BDO plant in end-April because of some technical issues. It is not known when the plant can resume production.

In northwestern China, Xinjiang Tianye shut down its three BDO units with a total capacity of 150,000 tonnes/year from 9 May for relocation of feedstock pipeline. The shutdown will likely last around 15-20 days.

The consequent reduction in supply buoyed up BDO prices in the week ended 12 May, but most market participants expect the BDO gains to be minimal and short-lived.

“BDO prices are rebounding this week, but will likely soften if all the plants are restarted in [the coming weeks],” a local end-user said.

BDO is used as a solvent and is also used in the manufacture of some types of plastics, elastic fibres and polyurethanes (PU).

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections