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Insight | Time:Nov 24 2016 1:30PM
BDO market surges on tight supply, strong raw materials
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BDO market has been recovering step by step in recent months on the back of successive supply tightness in the second half of 2016. Lately the heavy snow attacks North China, which damages transportation of BDO and raw materials, pushing up BDO prices further.

Time BDO
2016-11-21 9,500
2016-7-1 7,400
Change 28%
Maximum increase in the year 30%

So far, BDO prices have surged 28% in the second half of the year after latest hike. This week, a few small deals even have surged more than 1,000yuan/mt. Currently, offers for bulk goods have been raised to 9,800-10,500yuan/mt while discussing prices gradually reach 9,500-10,000yuan/mt as well. Traders mostly keep reluctant to sell goods and quote at high levels.

Since Aug when BDO plant operating rate stayed at extremely low level, BDO supply has been short. Although plant operating rate recovered later, in most time it only fluctuated around 60% with continuously intensive turnarounds. Sinopec Great Wall fails to restarted 200kta units while HNEC closed 2 units and has not decided when to resume. Xinjiang Tianye has not restarted a second phase unit while Shaanxi Shanhua and Dongyuan Technology run at reduced rates etc. Additionally, many downstream units are running at high rates, so BDO supply has still been short.

Besides, BDO raw materials show even stronger performances. Both butadiene and propylene are strong in the second half of 2016, especially butadiene which has been buoyant for long time except slight fall at the end of Oct. Propylene and calcium carbide rose slower than butadiene but also recorded significant increment.

Time Calcium carbide Butadiene Propylene
2016-11-22 3,125 12,300 6,850
2016-7-1 2,350 7,800 5,800
Change 33% 58% 18%
Maximum increase in the year 41% 108% 47%

As the figure shows, butadiene, propylene and calcium carbide prices all surge more than 40% in the year. This is on the back of recovering oil prices which lead to wide rise of petrochemical products. Although BDO prices have already surged evidently, it is still hard to cover the increasing raw material cost.

In total, the improvement of BDO mainly benefits from three elements: wide rise of petrochemical products, dramatic increase of raw material prices, and supply tightness of BDO itself. In this circumstance, further tightened supply resulted from unexpected weather problem stimulates BDO prices further. Given continuously firm raw materials and low operating rates, BDO market is to keep strong in short term.
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