Butadiene: Market Is Stable While Supply-Demand Structure Needs to Be Adjusted
Year:2018 ISSUE:21
COLUMN:ORGANICS
Click:264    DateTime:Nov.07,2018



By Song Xuemei, Sublime China Information


China’s butadiene production and supply situation

In recent years, China's butadiene production has been increasing, as shown in Figure 1. As of 2017, the total capacity of butadiene in China reached 3.709 million t/a, mainly concentrated in Sinopec and PetroChina, and the capacities contributed by private producers, Sinochem and NORINCO are small. Butadiene producers spread widely in the whole country, but most of them locate in East China and Northeast China.


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Figure 1  China’s butadiene production, 2013-2017


   At present, C4 extraction is the most popular butadiene production route, and the percentage of oxidative dehydrogenation process is small. Meanwhile, with the rapid development of the coal chemical industry, the coal and methanol-based butadiene capacity has reached 164 kt/a in 2017, from Jiangsu Sailboat and Shenhua Ningxia Coal Industry.


Butadiene demand status in China

   The major downstream industries of butadiene in China are polybutadiene rubber, SBR, ABS, SBS, nitrile butadiene rubber, styrene-butadiene latex, nitrile butadiene latex, SEBS, etc., as shown in Figure 2. Other derivatives like adiponitrile, adipic acid, 1,4-butanediol, MBS, tetrahydrofuran, thiophene and sulfolane are not big users of butadiene. The downstream consumption from all derivatives increased in 2017. SBR and polybutadiene rubber are two biggest consumers. However, the growth of these two sectors was slow in the past two years, and the additional capacity is relatively small. ABS and SBS are also big users of butadiene, and have been growing most rapidly.. They play an increasingly important role in the development of the butadiene market.


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Figure 2  Butadiene’s major derivatives in 2017


   Among all the downstream sectors, ABS industry enjoys the highest operating rate of over 90%, followed by the SEBS, nitrile butadiene rubber and SBS, whose utilization are all above 60%. The operating rates of other synthetic rubbers (except for nitrile butadiene rubber) are basically maintained at around 50%. The operating rates are closely related to the profitability, which of ABS, SBS and nitrile butadiene rubber industries is relatively high: the average annual profit of ABS and SBS is stably maintained at RMB2 000/t, and the profit of nitrile butadiene rubber in 2018 was even as high as RMB4 000 – 5 000 /t.
   As domestic butadiene capacity cannot fully meet the downstream demand, imports are still necessary. China’s butadiene import dependency is at around 10% now. Southeast Asian countries are the main sources of imports. The shipments from Europe has increased since 2017. Imports of butadiene mainly enter via East China, especially Nanjing Customs. The volumes coming in through ports in North China and South China are low.


Domestic butadiene price trend

   In the past five years, domestic butadiene market has been relatively stable, except for one sharp rise and fall in the end of 2016 and beginning of 2017, as shown in Figure 3. The price difference between butadiene and its downstream synthetic rubbers became small in 2018, and its raw materials prices kept being high. The tightness of supply prevented the butadiene prices from decreasing. The C4 extraction unit is an ancillary unit of naphtha cracker, and its cost is thus relatively low. Under the circumstances of increasing butadiene prices, the profitability of such units is considerable. Meanwhile, the profitability of units using oxidative dehydrogenation process is weak, which is also an important reason for their long-term low operating rates.


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 Figure 3  Butadiene profits of different production routes


China’s butadiene supply-demand forecast

   At present, domestic butadiene industry is still in a state of “tight balance”, and there is still a room for expansion. The market will see some additional capacities in the future, and a series of adjustments will occur in the supply and demand pattern. See Figure 4 for details.


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Figure 4  New butadiene capacities Vs. new downstream capacities, 2018-2022


   From the supply side, there will be many new butadiene lines launched in the next five years, most of which will be supporting units of ethylene projects. Inner Mongolia Jiutai Energy's 70 kt/a of oxidative dehydrogenation butadiene plant is scheduled to be put into operation at the end of 2018. In 2019, the market will see Zhejiang Refinery's 200 kt/a extraction line come on line, as well as the units of Nanjing Chengzhi Yongqing Energy and Panjin Baolai. The lines of Sinochem Quanzhou, Hengli Refining, Fujian Gulei, Shenghong Refining, Yantai Wanhua and Zhongke Refining will also be put into production in the future, with a total cumulative capacity of more than 1.5 million t/a.
   From the perspective of demand, new downstream capacities are mainly concentrated in the fields of polybutadiene rubber, SBS, ABS, SEBS, and S-SBR. The growth of ABS and SBS is particularly obvious, as there will be 650 kt/a new ABS capacity, and 300 kt/a additional SBS capacity. In the next five years, the growth rate of butadiene supply will be obviously greater than that of the demand. The supply will reach 1.73 million tons, but the demand will only be 600 kt. The import volume of butadiene will decrease, and the export might be possible.