OUTLOOK ‘18: Asia PBT, BDO prices likely to recover in Q1 after lull in Dec

SINGAPORE (ICIS)–Asia spot prices of polybutylene terephthalate (PBT) and its upstream product, 1,4-butanediol (BDO) in the first quarter of 2018 are largely expected to be stable-to-firm from December’s prices amid improved demand.

Gains in upstream 1,4-butanediol (BDO) prices in the Chinese domestic market in the second half of December were seen amid tightened supply from shutdowns, which could likely lend support to PBT prices as well in the first quarter.

Demand for both BDO and PBT in the fourth quarter of the year was largely curtailed due to harsh winter conditions in parts of northeast Asia, which could potentially hamper transportation for cargoes.

Also, some buyers are also expected to keep their inventories low towards the end of the year ahead of the closing of accounts. As a result, spot procurement activity is expected to remain largely muted in December for both PBT and BDO.

“Cargo uptake among buyers in December is likely to be slow as demand in the China market would have limited reasons for improvement,” A China-based PBT maker said in Mandarin. “However, buying appetite among our customers generally improves ahead of Lunar New Year, and that is when we might see some support for spot pricing.”

A BDO maker in South Korea, who reduced its contractual prices for December in its local market, accounted price decline in December as ‘buyers are trying to minimize their stocks at the end of the year’.

However, restocking activities among northeast Asia-based BDO and PBT buyers ahead of Lunar New Year in mid-February are likely to lend upward support to spot prices, especially since buyers would typically replenish inventories ahead of the festivities.

This applied to both the Chinese domestic market and also the regional northeast Asian import market.

“Typically, we will try not to buy too much ahead of the closing of accounts, but before Lunar New Year we need to procure enough material to ensure that downstream operations continue running smoothly.” a PBT buyer said,

According to market players, procurement for restocking purposes would usually take place from late December.

Furthermore, in December, gains in upstream crude prices were observed, leading some regional producers to hold on to expectations of supported downstream prices.

“Following OPEC’s announcement of crude oil output cuts, it is logical to expect price increase to gradually translate into firmer production costs for BDO and downstream products such as PBT,” a northeast Asia-based BDO maker said in Mandarin,

“As a seller, we might have to raise prices going forward to account for these increased costs,” the BDO maker added.

A separate BDO seller echoed similar sentiments: “With increased pressure coming from upstream crude prices and also, persistently squeezed profit margins from slow demand for BDO, it is understandable if BDO prices see gains going forward into early first quarter.”

As such, most market players said that prices for BDO and its downstream product, PBT, could potentially be buoyed by improved cargo uptake ahead of the Lunar New Year festivities, the start of a fiscal year for some market players and upward price pressure from gains in crude futures.

Outlook article by Jasmine Khoo