China Butanediol Prices Dip After 4 Months of Surge; Profit Margins Still High
- Journalist: Jaideep Kumar
1,4-Butanediol (BDO) prices in China were on the rise since the start of Q1 this year. After persistent supply-side constraints concerning BDO buyers and record surge in offers, BDO prices have finally shown a drop in later parts of April and early May. A dip of around 30% has been witnessed in the prices of BDO in comparison to the prices observed in the 1st week of April.
Amid slackening downstream demand, many BDO manufacturers have decided to shut their plants for maintenance. Among several producers opting for maintenance turnarounds, Shaanxi Heimao Coking shut its 60 KTPA BDO unit for 15 days and Markor Chemical also shuts its BDO plant with the capacity of 160 KTPA. Both plants went offline in the 1st week of May. Henan Kaixiang Chemical also shut its 110 KTPA facility for one month maintenance turnaround in the second week of May.
The major cause behind the sudden drop in prices has been the bearish sentiment market where demand for BDO has plummeted and manufacturers are selling off the product at reduced prices. Downstream PBT (polybutylene terephthalate) and PBAT (polybutylene adipate terephthalate) operating rates have also plummeted in China, with average PBT plant operating rates were below 50% in April. Buyers have also caught the wind of the sentiments hence they are also challenging the high prices which has been evident as in spot market prices have lowered down.
Although drop in prices has impacted the profit margins for manufacturers, however manufacturers still enjoy a significant profit margin of more than 50%. Ex-Works Qingdao rates for the week ending 14th May were assessed at USD 3320 per MT.
As per ChemAnalyst, “Moving towards May end, offers for BDO are likely to further decline considering weak downstream demand as market enters off season and report high inventory levels. BDO prices in China are likely to ease further in the coming weeks with limited support expected from the maintenance shutdowns”.