Can the Chinese BCS Market Remain Firm amid Bearish Factors?

In September 2017, the supply of imported butyl cellosolve (BCS) was limited at ports. Moreover, Chinese-made BCS goods were mainly for downstream users. The overall supply was tight in the spot market. Moreover, ethylene oxide (EO) and n-butyl alcohol (NBA) prices were at highs, which supported the BCS market. The BCS market price had hit a new high.

Up to September 18, 2017, the reference prices for bulk BCS in East China were around RMB 12,300/mt, which increased RMB 1,700/mt or 16%. Reference prices for bulk BCS in South China were in the range of RMB 12,900-13,200/mt, up RMB 2,000/mt or 18%. After the booms, will the BCS market slump？

Bullish Factor

The supply will continue to be tight and producers hold firm offers. In September, only 500mt goods will arrive at Jiangyin Port. Most traders will hold stable offers and they are unwilling to sell goods.

Bearish Factor

Currently, the profits of BCS are high. The price of EO is around RMB 9,800/mt, and the price for NBA is RMB 7,950/mt. The production cost of BCS is RMB 9,868/mt and offers are RMB 12,400/mt. Some traders’ inventories are at low levels. It is difficult for the BCS price to move up on the current high prices. The low-priced goods may influence the market sentiments.

Downstream users are cautious when buying and the overall trading is thin. Given the coming National Day holiday, plays have thought that the demand for BCS may increase before the holiday. In fact, the demand for BCS is limited.

On the whole, the Chinese BCS market will turn to be flat. Considering the hurricane in U.S., the supply of imported BCS is tight. As around 70% of BCS rely on import, most traders will hold firm offers. However, influenced by the environmental protection supervision, the buying interest is weak. ECHEMI forecasts that the Chinese BCS market will be largely stable or see mild declines.