OUTLOOK ‘18: China BG may come under pressure on increased supply

28 December 2017 02:41 Source:ICIS News

SINGAPORE (ICIS)--Butyl gylcol (BG) spot prices in Q4 2017 in China hit levels not seen in more than two years on tight supply, but that may change when supply to Asia from the new Sadara Chemical Company BG plant stabilises in early 2018.

Saudi Arabia’s Sadara announced on 8 June the official commercial start-up of its 200,000 tonne/year capacity BG plant in Jubail.

The first cargo to Asia arrived in end-July but subsequent cargoes were met with some delays and uncertainties, according to feedback from market players.

Sadara is a joint venture (JV) between Saudi Aramco and Dow Chemical. Dow is responsible for the marketing of Sadara’s BG cargoes into Asia.

So far, market players were relieved with how Dow handled the sales of Sadara’ cargoes into Asia with the market not panicking  and prices have not dropped.

Market players expect supply to stabilise and shipment to be regular from early next year.

Another market player expected some rebalancing of supply but expected the market to be able to absorb the new supply.

“Not all of Sadara’s volumes will be bound for Asia; Partial volumes will remain in the Middle East and some will go to Europe, so the market should be able to absorb the volumes,” said a market player, who expected demand for BG market to grow in 2018.

Others, however, believe that competition would intensify.

“When new supply comes in, it is expected that some existing suppliers will lose market share,” said another Chinese importer.

Volumes from Taiwan’s Oriental Union Chemical Corp (OUCC) are also expected to come on stream next year.

OUCC’s plant, with a combined annual capacity of 30,000-40,000 tonnes of BG/butyl di-glycol (BdG), was originally slated to start operation in mid-2017 but was delayed due to shortage of feedstock ethylene and ethylene oxide.

The plant completed trial runs in July but did not start to produce commercially due to ethylene shortage.

Meanwhile, the anti-dumping duties that China currently has in placed for BG and BDG imported from the US and EU will expire at the end of January 2018.

The five-year anti-dumping duties had been in place since since Jan 28, 2013.

A midterm review of the dumping and dumping margin of the imports of BG and BDG from the US and EU has been conducted since April 2017, but the outcome is still uncertain.

In the event if the ADD is extended and the dumping margin is increased, volumes from deep sea suppliers into China could be further curtailed.

Currently, importers in China already tend to favour cargoes with shorter delivery windows that present lesser risk.

Domestic prices in China has already started to drop due to a slow down in demand during winter.

On the demand front, the Lunar New Year will start in mid-February, and business would likely slow down near to the festival.

Market players expect demand to grow in line with China’s GDP growth next year with no other significant new consumption capacity heard.

Demand for by-product butyl di-glycol is expected to be firmer due to the growth in demand from the electronics sector.

China is a major importer of BG in Asia and imported about 153,797 tonnes of BG in 2016. (please see interactive below)

BG, derived from ethylene oxide (EO) and n-butanol (NBA), is also known as ethylene glycol ethers (EGE).

By Li Li Chng