Butadiene market will still be in short supply in 2012

The weakness of international and domestic economic conditions and the sluggish demand from end-users led to the overall butadiene market showing high and low prices in 2011. In 2012, due to the supply side tension and the favorable factors such as the downstream production of synthetic rubber equipment, butadiene may have a tendency to fluctuate at a high level.

In 2011, the butadiene market was turbulent, rising from 16,000 yuan (t price, the same below) at the beginning of the year to 30,000 yuan in July-August, and then dropped to 13,500 yuan. At the end of the year, the chemical market declined. Butadiene suddenly rises to the perfect ending of the tail-ending market and re-stops at the 20,000 mark. Looking at the trend of butadiene in 2011, market demand and economic environment have become the main forces in the domestic market.

In the first half of 2011, there were two main reasons for the rise in butadiene prices: First, in March, the large earthquake in Japan caused multiple sets of ethylene production facilities to close, resulting in tight supply of Asian butadiene market and rising domestic prices. Second, it coincides with the automobile industry. When the market is booming, the demand for synthetic rubber is greatly increased and the consumption of raw material butadiene rises simultaneously. However, after July, the market’s worries about the US and Europe’s economy intensified, and the prices of major crude oil and petrochemical materials such as international crude oil dropped sharply. In particular, after the sixth domestic deposit reserve ratio increase in June, the effect of currency tightening policies became apparent, and butadiene prices were added. With high prices, it is difficult to transfer the cost to the downstream, and the funds of small and medium-sized downstream producers are tight. They have taken measures to reduce the production load or stop and have reduced the purchase of butadiene. At the same time, more than 60% of butadiene has entered the terminal tire and automotive market through the downstream synthetic rubber field, and the third quarter has traditionally been the tire production off-season. The arrival of the off-season will inevitably affect butadiene demand. Under pressure, the market price of butadiene declined. The end of the year's market has not only resulted in a retaliatory rebound after the product's value has been underestimated, but also is a strong support for domestic companies to implement a supply-side sales strategy. At present, there is still room for price increases in the domestic market.

In 2012, there are three main factors affecting the butadiene market: the supply side, the demand side, and the economic situation.

During the "12th Five-Year Plan" period, it is expected that China's butadiene consumption will grow at an average annual double-digit rate, while the compound growth rate of butadiene capacity expansion will be less than 8%, and the capacity delivery rate will be lower than the demand growth. At present, butadiene produced by CNPC, Sinopec and CNOOC is mainly self-sufficient. Qi Xiang Tengda 100,000 tons/year of butadiene was completed and put into operation this year, which is far from meeting the demand growth. With no other new production capacity put into operation, the domestic butadiene market supply situation will hardly change in 2012. The main application areas of butadiene in China are butadiene rubber, styrene-butadiene rubber, ABS, SBS and nitrile rubber. In the past 10 years, both butadiene production capacity and output have increased rapidly, but supply is still in short supply.

The downstream demand for butadiene will increase in 2012. At present, various regions have launched synthetic rubber projects. In 2011, approximately 520,000 tons of new synthetic rubber production capacity was put into operation in China. In the next two years, the company will add 770,000 tons of butadiene rubber production capacity. Currently, there are 100,000 tons/year of styrene-butadiene rubber and Fuxiang, which are under construction. Tengda 50,000 tons/year rare earth butadiene rubber and other projects are expected to reach production this year. The total capacity of synthetic rubber to be built in China is already over 2.4 million tons, which will increase the demand for butadiene by more than 1.4 million tons, which is good for the raw material butadiene market.

At the same time, the external supply of butadiene was tightened. In the United States, with its lightweight domestic raw materials, the dependence on butadiene imports will increase year by year; due to the impact of cheap products in the Middle East, the European petrochemical industry was forced to shut down its own ethylene plant, and the local ethylene production dropped sharply and it has already peaked. The annual output of 24 million tons has dropped to the current 18 million tons, and the annual output of butadiene has dropped year-on-year. Japan Asahi Kasei and other companies have plans for the construction of styrene-butadiene rubber projects.

It is expected that butadiene production capacity will increase at an average annual rate of less than 3% in the next few years, while global butadiene consumption growth rate will far exceed 3%, and demand growth will also be faster than capacity expansion. There will still be gaps in the supply and demand of butadiene, and supply shortage will be the trend of normalization in the coming period. The tightening of the supply of peripheral butadiene has become a foregone conclusion, and will play a role in pushing up the butadiene market in China.

However, the economic situation in 2012 is not optimistic: First, due to the European debt crisis, the major indicators of the euro zone economy showed a significant downward trend at the end of 2011, the decline in external exports, the value of production has shrunk, corporate orders have been substantially reduced, retail consumer The situation of decline will continue to ferment, and the global economic situation in 2012 will continue to be dominated by pessimism. Second, market confidence will drop sharply and the economic growth momentum will remain insufficient. Third, 2012 will be the year of global elections, coupled with the Iranian issue and North Korean leaders. The change has made the economic and international crude oil prices appear increasingly confusing.

The Bank of Communications Financial Research Center's “2012 China Macroeconomic Outlook” recently released predicts that the actual growth rate of China’s GDP will remain at around 8.5% in 2012. China’s economic operation may face rapid shrinking external demand, large fluctuations in short-term capital flows, and real estate. Partial burst of price bubbles and risk of local defaults on local platforms. At the same time, the increase in resources and labor costs has raised the cost of economic growth, and the slowdown in exports has exerted pressure on industrial production. All these factors will be a stumbling block to the prosperity of the bulk chemical products market and will certainly become a negative factor for the butadiene market.

Therefore, the domestic butadiene market in 2012 once again the price skyrocketing may not be big, or will fluctuate high.