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China Butadiene Market Insipid in H1, 2018

China’s butadiene market didn’t see obvious ups and downs in H1 of 2018. However, it also showed some different features during this period. Especially in these days, butadiene prices once approached the prices of SBR and PBR, and the whole market was in a stalemate. China’s butadiene market performed flat in H1 of 2018. However, there will be most of newly added butadiene units going into production in the future. The following aspects can summarize the butadiene market development in H1 of 2018.

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The fluctuation range of butadiene market price narrowed.

In H1 of 2018, the fluctuation range of China’s butadiene market price shrank notably compared with the same period of last year. Taking the market price in East China as an example, in H1 of 2018, butadiene market prices hovered within RMB 9,600-12,800/mt, while that fluctuated within RMB 7,500-26,700/mt at the same period of last year. The expected high prices didn’t appear during the units’ maintenance season. The low operating rate at downstream plants failed to trigger off the slump in prices. Players were more cautious about the market in 2018, and the whole market was relatively stable.

The supply rallied constantly and the self-sufficient ability improved.

Generally speaking, China’s butadiene units could be shut down for maintenance intensively in Q2, and this year was no exception. China’s butadiene capacity advanced from the same period of last year, thus the supply also elevated accordingly. Jiangsu Sailboat Petrochemical, Shenhua Ningxia Coal Industry, Puyang BuleStar New Material and CNOOC and Shell Petrochemicals put the butadiene units into production, and the added capacity was accumulated to 394kt/a. For the time being, all four units ran normally but at low load, which replenished the market notably. According to SCI’s statistics, in H1 of 2018, China’s total butadiene output reached around 1,330kt, up 50kt Y-O-Y. Domestic self-sufficient ability improved.

The operating rate of major downstream industries hit a new low.

In H1 of 2018, the operating rates of SBR and PBR industries were at low levels, affected by the environmental protection inspection and high feedstock prices. The operating rate once slid to around 40%. However, the operating rates of NBR, SBS and ABS industries improved in 2018. The consumption volume for butadiene edged up from the same period of last year. According to SCI’s statistics, the consumption volume for butadiene was around 1,379kt in H1 of 2018, up more than 10kt from the same period of last year.

The profitability of butadiene industry was still considerable.

China’s butadiene price saw small-ranged movements in H1 of 2018. The upward range of naphtha prices was small. The profits at C4 extraction producers were considerable, and the theoretical profits were around RMB 4,000/mt. The cost of butadiene produced via butene ODH technology was still high, and the producers were at losses overall in H1 of 2018. Producers who were equipped with upstream units gained favorable profits. However, the profitability was not higher than that via C4 extraction technology.

As seen from downstream industries, the NBR industry gained the profits most. The profitability was the highest among butadiene’s downstream industries. The profits at NBR industry reached RMB 4,000/mt in H1 of 2018, driving up the production incentive in the NBR industry. The profitability of ABS and SBS industries was better obviously than that of the synthetic rubber industry. The average profit maintained over RMB 1,000/mt. The synthetic rubber industry remained weak and was at losses. Especially in recent two months, the price spread between butadiene and synthetic rubber was within RMB 1,000/mt. Producers suffered production cost pressure obviously.

China’s butadiene market performed flat in H1 of 2018. However, with newly added units running normally, the supply and demand will see changes in China’s butadiene market.

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