China domestic BDO prices extend gains on tight supply

01 February 2018 05:01 Source:ICIS News

SINGAPORE (ICIS)--China’s domestic butanediol (BDO) prices have been rebounding on the back of tight supply, which may continue in the near term with plants running at reduced capacity and amid logistics problems in the northwestern and central regions of the country.

On 31 January, BDO prices in east China stood at yuan (CNY) 11,000/tonne DEL (delivered), up by CNY700/tonne or 6.8% from 11 December 2017, when prices started their steady increase, according to ICIS data.

Over a period of more than six months from 26 May 2017, spot BDO prices had shed 9.7% before staging a rebound, the data showed.

Sluggish downstream demand pulled down BDO prices for most of the second half of 2017, with downstream polyurethane (PU) and thermoplastic polyurethanes (TPU) sectors running at reduced rates.

BDO producers had been struggling to generate margins as the gap between the spot prices of the material and production costs had substantially narrowed at the time.

Prices changed direction in early December last year as supply has largely been tight. BDO plants have been running at an average rate of 50-60%, while higher prices of feedstock natural gas have provided a further lift to the market.

China’s total BDO production capacity stands at 1.72m tonnes, according to ICIS data.

Among domestic producers, Xinjiang MarkorChem is running its three plants with a combined capacity of 260,000 tonnes/year at 20-30%; while Xinjiang Tianye’s four plants with a total capacity of 210,000 tonnes/year were taken off line for maintenance on 16 January and are due to restart in early February.

Xinjiang Blue Ridge Tunhe Chemical Industry’s 100,000 tonne/year BDO plant will be down for a week from 26 January to undergo catalyst change, while Shaanxi Ronghe’s 60,000 tonne/year plant has been shut since August 2017 with no definite restart date.

Meanwhile, logistic issues are aggravating the tightness in BDO supply in the domestic market. In northwest and central China – which account for 66% of the country’s total BDO production – rains and snow were hindering transportation of cargoes, resulting in delayed deliveries of contract volumes.

Industry sources warned of further delays in cargo delivery due to the upcoming week-long Lunar New Year holiday on 15-21 February in China.

But demand also typically weakens in the weeks leading to the holiday as small downstream PU and TPU producers are expected to suspend production for 20-25 days, market sources said.

After the week-long Lunar New Year holiday, the tight supply conditions may ease a little as China is expected to welcome new BDO capacities, including Guotai Xinhua’s 100,000 tonne/year plant, as well as Hancheng Tiangong’s 60,000 tonne/year plant in Shaanxi.

Focus article by Jady Ma

Picture: Polyurethane gloves. Butanediol (BDO) is used as a solvent and is also used in the manufacture of some types of plastics, elastic fibres and polyurethanes (PU). (Photographer: Brian Bould/Associated |Newspapers/REX/Shutterstock)

($1 = CNY6.29)

ICN

By Jady Ma