China BG import prices may track domestic market gains

SINGAPORE (ICIS)–China’s butyl glycol (BG) spot import prices may be stable-to-firm in the weeks ahead following months of declines, on the back of firming domestic prices of the material due to an increase in feedstock n-butanol values.

In the week ended 12 July, prices were assessed stable week on week at $1,010/tonne CFR (cost and freight) China, according to ICIS data.

China’s import prices have largely steadily fallen since 5 April, shedding a cumulative 14.6% over a three-month period, based on the data.

Demand for BG typically weakens in July due to hot weather, which is not conducive for production in the downstream coating sector.

Lower operating rates at small to mid-size downstream plants amid stricter environmental checks in China have further reduced demand for the material.

In addition, buying sentiment in China has been weak as market players expect fresh supply from Saudi Arabia’s Sadara Chemical to hit Asia in September. The additional supply could mean further downward pressure on BG prices.

But China’s domestic BG prices are being nudged up by gains in feedstock n-butanol values, which increased by more than 10% from 28 April to yuan (CNY) 6,575/tonne ex-tank in the week ended 7 July.

On 12 July, a Chinese BG producer raised its prices to CNY9,000/tonne EXW (ex-works), up by CNY200-300/tonne from last week on the back of n-butanol gains and stable prices of co-feedstock ethylene oxide (EO) in China.

Meanwhile, asking prices for import BG were heard in the range of CNY8,800-9,000/tonne ex-tank, up by around CNY200-250/tonne from the previous week.

Chinese buyers have remained cautious even as prices started rising, market players said, citing that import cargoes loading in July/August would likely arrive in August/September, when new supply is expected to reach Asia.

Following their almost steady decline over a three-month period, China’s import prices for BG had fallen below those of southeast Asia for the first time in nearly a year.

Spot BG prices in southeast Asia have been on a steady but gradual uptrend over the past year, according to ICIS data.

Malaysia’s PETRONAS Chemicals Group (PCG), a sole BG producer in the region, has been careful in adjusting prices to protect its market share in southeast Asia, according to market players.

Discussions were limited in the week ended 12 July because of tight supply, which will be aggravated when PCG starts a two-month turnaround at its plant from 17 July.

PCG’s plant in Kerteh, Terengganu can produce 60,000 tonnes/year of BG.

Over the last year, China spot prices had been supported by a combination unstable domestic output and spikes in feedstock costs.

For about a month from mid-February, CFR China prices were higher than CFR SE Asia prices by about $260/tonne before the price gap started to steadily narrow until it converged and flipped, according to ICIS data.

In the week ended 12 July, CFR SE Asia prices were assessed stable week on week at $1,025/tonne, which was $15/tonne higher than China’s import prices, according to ICIS data.

PCG hiked its offers to southeast Asia by 7% ahead of its scheduled plant turnaround. Its offer price for June/July cargoes was at $1,050/tonne CFR SE Asia from around $980/tonne CFR SE Asia for May cargoes.

Some southeast Asian buyers found the price hike unworkable, citing possible window for BG of other origins, like the US, to flow into the region.

A northeast Asian BG producer said it received increased enquiries for July shipments from buyers in southeast Asia, which is in tight supply of the material.

Focus article by Li Li Chng

($1 = CNY6.78)

Picture: Butyl glycol (BG) is used in paints and coatings. (Source: PhotoAlto/REX/Shutterstock)