China BG hits two-year high; may extend gains on rising costs

SINGAPORE (ICIS)–China’s butyl glycol (BG) prices spiked to their highest level in more than two years and could increase further on the back of rising feedstock prices and tight supply.

But the market outlook is clouded with uncertainties over new supply from Saudi Arabia’s Sadara Chemical.

“The China market will continue to be bullish, until Sadara cargoes become available,” a market player said.

A number of Chinese importers received selling indications this week for Sadara’s cargoes at $1,200-1,300/tonne CFR (cost and freight) China, for materials exempt from antidumping duties (ADDs) but subject to a 5.5% import duty.

Sales of Sadara’s cargoes within China were delayed due to issues regarding the certificate of origin of the shipments, market sources said. This certificate exempts the cargoes from China’s ADDs.

According to market players’ estimates, some 6,000-8,000 tonnes of Sadara cargoes were heard to have reached south China and South Korea since end July.

Discussions were ongoing, indicating that the documentation issues on the Sadara cargoes might be resolved soon.

In the week ended 13 September, BG rose to an average price of $1,225/tonne CFR China, up $20/tonne from the previous week, according to ICIS data.

On Wednesday, spot prices of imported BG in east China were heard at Chinese yuan (CNY) 12,300-12,500/tonne ($1,881-1,911/tonne) ex-tank, up by CNY1,000-1,050/tonne from the previous week.

China’s import prices for BG have risen steadily since early July, accumulating gains of more than 19% over a period of two months.

BG prices have been surging, mostly tracking gains in feedstock ethylene oxide (EO) and n-butanol due to tight supply, as well as gains in the upstream ethylene market, since early July.

Tight supply has also been instrumental in driving up BG prices in China, with the shutdown of the 80,000 tonne/year plant of Dynamic (Nanjing) Chemical Industry in early August.

The plant restarted on 19-20 August and operated at lower-than-normal rate for a time due to limited availability of feedstock. The producer resumed full operation at the plant this week but had no stock, market sources said.

China’s inventory for import materials was also understood to be low, with no spot discussions heard for deep-sea and regional cargoes in the week.

Previously, some importers had refrained from buying cargoes, expecting the fresh supply from Sadara could push down prices. A handful of importers holding limited cargoes are keeping their offers firm.

Meanwhile, importers deemed deep-sea cargoes from the US too risky.

“We will not discuss spot deep-sea cargoes now as supply will only reach three months later, we don’t know how the market will be like,” said an importer.

Chinese importers remained hesitant to enter the market amid uncertainties in supply.

“It is very risky to buy at current high prices as when Sadara’s cargo started to sell, prices might come down,” said another importer.

Meanwhile, cargoes for September loading and October/November arrival to Asia from US producers Eastman and Lyondell would be delayed in the aftermath of Hurricane Harvey, which caused massive shutdowns of refinery and petrochemical capacities in the US Gulf Coast, market sources said.

US’ BG exports to Asia may even fall in the fourth quarter as its producers may prioritize increased domestic demand.

There were no monthly discussions held for Dow Chemical’s US-origin cargoes to China from August onwards, market players said.

It makes more sense for Dow to sell Middle East BG to China, instead of US-origin cargoes, which are subjected to 14.1% ADDs, market players said.

Sadara Chemical is a joint venture between Dow and Saudi Aramco.

Focus article by Li Li Chng

Pictured above: Trucks at Qingdao port, China. (Source: Sipa Asia/REX/Shutterstock)