On February 22, 2021, the BDO of SHAANXI YANCHANG PETROLEUM（GROUP）CO.,LTD was sold at the price of RMB 29300/ton (around USD 4536), which caused the cost of PBAT raw materials to rise to more than RMB 5000/ton (around USD 775). On November 24, 2020, the price of BDO was still around RMB 12000.
It means in the past 4months, the price of BDO rose by 17000 yuan (around USD 2631).
In fact, the domestic BDO market bottomed out and rebounded in the second half of 2020, and the rising trend continued to the last ten days of November 2020. Starting after the new year of 2021, the price of BDOis rising into the top three of the chemical sector.
Butane-1,4-diol, also known as BDO and dihydroxybutane, is an organic compound. The upstream raw materials of BDO include calcium carbide and methanol, but the raw materials have little effect on BDO. BDO is widely used in many downstream applications, and is the direct raw material of PTMEG, PBT, PBAT, GBL-NMP and other chemicals. PTMEG is the raw material of spandex, and PBT is used in spinning, automotive plastic parts, optical fiber outer protective shell and other fields, and PBAT is the direct raw material of degradable plastics.
Comprehensive analysis shows that there are several major reasons for the price rise of BDO, such as supply reduction, transportation restriction, manufacturers' strong desire to sell, high quotation, booming PBAT market in the industry, sharp increase in demand, and bullish position filling in the downstream. The quotation of manufacturers continues to rise, the market follow-up sentiment is high, and the BDO market continues to rise in a short period of time.
Main reasons for the explosive price increase of BDO (raw materials for PBAT)
1. Part of the plants for BDO are still in shut down and the supply is reduced
According to the rough estimation of the Institute of biodegradable materials, the current domestic BDO production capacity is about 2.4 million tons, and the actual output is about 1.6 million tons.
From January to February 2021, in addition to Xinjiang Tianye's 30000 ton unit still in operation, many units were shut down for maintenance or replacement. In addition, in January, some areas in China were affected by COVID-19 and so on. Logistics and transportation were limited and freight increased, resulting in slow delivery of orders.
2. The BDO manufacturers are reluctant to sell, so the price offer tend to be high
Some enterprises that produce BDO are integrated enterprises, and their own inventory is digested by themselves, forming a complete industrial chain. For example, Xinjiang Blue Ridge Tunhe (the largest PBAT producer in China) has a production capacity of 238000 tons of BDO, part of which is used for its own PBT, PBS / PBAT and PTMEG production.
3. The demand of the downstream industries are increased and stock up
Since the second half of 2020, PTMEG spandex industry chain has been the most outstanding downstream industry of BDO. On the other hand, the consumption of PTMEG is increased. PTMEG, as the largest downstream industry of BDO, also increases the consumption of raw materials. Other downstream industries are also developing healthily, and the demand is increasing. Especially in the recent Spring Festival holiday, the State encourages "Celebrating the Chinese new year on the spot". Many downstream large factories "do not stop work during holidays". Therefore, many middle and downstream customers enter the market to make up for their positions.
At the same time, the downstream industry PBAT industry increased dramatically, driven by the National Plastic restriction policy in China, resulting in a surge in demand, thus increasing the digestion capacity of raw materials. According to the statistics of the Institute of biodegradable materials, about 340000 tons of PBAT capacity will be put into operation in 2021, and the total domestic capacity will reach 667000 tons. According to the calculation of 0.55 tons of unit consumption, the consumption of BDO by PBAT in 2021 is expected to increase by 100000 tons + (only rough estimate).
4. The mentality of “Running after Rising and Falling”
After the domestic BDO industry implemented the linked settlement policy in November 2019, the online auction started in September 2020. After each auction, the BDO price is at a relatively high level. The bidding price from January to February 10 is 13500 → 13700 → 15000 → 16300 → 16500 (Xinye ex factory price) → 18050 → 18150 → 19010 (extended ex factory price → 20750 → 22000 → 22050). On February 22, 2021, the highest bidding price of Yanchang oil BDO was 29300 yuan. In the current state of hard to find goods, the auction price will not only push up the market, but also stimulate the downstream buying mentality to enter the market.
Source: Institute of biodegradable materials