Butadiene prices plunged in September, where is the bottom？

At the beginning of September, butadiene market decline accelerated.  As of September 3, in just three days, the spot price in the domestic market fell 350-450 CNY/ton compared with August 31, down nearly 5%.  And Sinopec  price and overseas price drop up 9% or so.

From late July, butadiene prices began to decline, and the decline gradually accelerated from the end of August.  Butadiene fell sharply in September, on the one hand, the main reason lies in the incremental supply concentration brought by new domestic production capacity.  On the other hand, due to the weakening demand in the United States, northeast Asia, especially the export of domestic sources of goods, is blocked, resulting in the contradiction between supply and demand intensified.

In this case, where is the price floor for butadiene?

1: Supply side

 With the production of Zhejiang Petrochemical Phase II, Shandong Luqing Petrochemical and Gulei Petrochemical, the new capacity will continue to release production in September, and most of the domestic devices have no routine maintenance plan, where is the positive expectation on the supply side?  At the same time with the domestic butadiene market plummeted, part of the late operation of oxidative dehydrogenation device is worth paying attention to.  On the other hand, we should also pay attention to the operation of the upstream cracking unit of Luqing Petrochemical.

2: Downstream requirements

 Around mid-September, qilu Petrochemical has plans to restart its synthetic rubber plant, which has a total capacity of 310,000 tons/year for sbutadiene and styrene butadiene rubber.  With the smooth restart of the above units, the supply pressure of butadiene in sinopec system will be significantly relieved, which will bring certain support to the butadiene market.

In addition, at present, Shandong Huayu, Shandong Witte, Qixiang Tengda and other synthetic rubber devices stop or load is low, Zhenhuashun butadiene device is also in the trial stage, the subsequent butadiene market fell to the low, whether it can stimulate the downstream device to start lifting, it is worth paying attention to.

3: the export

Early demand gap of butadiene in the United States is obvious, a large number of Asian and European cargo exports to the United States.  With the arrival of the cargo in the early stage of the transaction, the demand of the United States in the next 2-3 months has been basically satisfied, resulting in the recent weak demand in the United States.  Some businesses expect weak U.S. renewals to continue beyond October.  Therefore, China's source exports are still facing greater pressure.  However, as the domestic market continues to decline, it is necessary to pay attention to whether FOB China price can bring export hope.

To sum up, there is still demand in the Chinese market.  Although most of the downstream demand in east China is covered by the contract, but the downstream demand in the north will be in some low price nodes to the market to bring temporary bottom support.  In the final analysis, price is still an effective means of regulating supply and demand and the flow of goods.  It is recommended to pay careful attention to the internal and external market in late September and changes in the price difference between upstream and downstream products.