Butadiene Rubber's Cost in China Floor Collapses, Exports Hold the Line

In 2026, the butadiene rubber market is being pulled in two opposing directions. On one side, raw material prices have collapsed, wiping out cost support. On the other, exports have hit a two-year high, providing underlying demand support. Prices can't rise, yet they can't fall sharply either, leaving the market stuck at a delicate equilibrium.

The core variable driving the current market is raw material 1,3-butadiene. Early January saw prices around RMB 11,200/ton. Then, heightened tensions in the Middle East forced a substantial reduction in operating rates at ethylene crackers in Japan and South Korea. As a byproduct of ethylene cracking, a cut in main product output means a simultaneous evaporation of byproduct supply. Asian supply suddenly tightened, pushing prices all the way up to over RMB 18,000/ton by the end of March – a cumulative Q1 gain of more than 60%, hitting a high not seen since 2017.

But sentiment took a sharp downturn in April. Import cargoes delayed earlier by logistics disruptions arrived in a concentrated wave, pushing East China port inventories up by nearly 10% in a single week. Meanwhile, operating rates at Asian ethylene plants gradually recovered, quickly filling the supply gap. Panic selling by traders triggered a steep price collapse. By April 27, the benchmark price had fallen to RMB 13,100/ton, down more than 27% from end-March, shedding more than a quarter of its value in just one month.

As the direct downstream product, butadiene rubber has mostly followed the raw material trend, but its decline has been notably more restrained. Prices started around RMB 11,960/ton in early January, pushed higher by rising costs, and climbed to RMB 17,720/ton in early April – a cumulative Q1 gain of over 42%. As the pressure from collapsing raw material costs transmitted downstream, prices fell back to RMB 16,420/ton on April 24, down 7.34% from the start of April – a drop less than one-third the magnitude of the raw material decline. The cushioning force behind this relative resilience is exports.

In March 2026, China exported 35,157.25 tons of butadiene rubber, up 41.22% month-on-month and soaring 47.41% year-on-year – the highest monthly volume on record in two years. Cumulative Q1 exports reached 91,938.93 tons, a 31.76% year-on-year increase. At this pace, annual exports are highly likely to hit an all-time high. Even more significant: March exports stably exceeded imports for the first time, meaning China has officially entered a "net export" era for butadiene rubber.

Export destinations are highly concentrated in Southeast Asia. Vietnam, Thailand, and Cambodia together account for more than 64% of the total, with Vietnam leading at 32.9%, followed by Thailand at 22.06%. This demand mainly stems from the concentrated ramp-up of tire production capacity in Southeast Asia. Over the past two years, Chinese tire companies have been moving aggressively overseas, with new plants coming online in Vietnam and Thailand, while Cambodia has rapidly emerged as a new manufacturing base from almost nothing. As production lines run, the demand for synthetic rubber is both rigid and continuous. China, as the world's largest producer of butadiene rubber, naturally becomes the supplier of choice.

The flip side of surging exports is tepid domestic demand. In March, production of semi-steel and radial tires jumped 69.86% and 64.45% month-on-month respectively – the manufacturing side isn't weak. However, after the steep price surge in Q1, tire makers became extremely resistant to high-priced raw materials, limiting purchases to essential needs and avoiding inventory building, thereby capping absorption capacity. With mounting pressure on downstream enterprises, exports have become the only major channel to reduce inventories, acting as a pressure release valve for the market.

China's butadiene rubber market is currently in a state where it won't collapse but can't rally either. An upward move would need a signal from the cost side, while downside is capped by exports and low inventories. The market is likely to remain in a range-bound, slightly weakening consolidation for some time.