CFR China butadiene falls $35/mt to 16-month low

Asian butadiene dropped $35/mt day on day to $555/mt CFR China on Dec. 30, the lowest level since August 2020 according to S&P Global Platts data, dragged down by bearish sentiment in China as production there rises.

Market sources said China's butadiene production is seen around 330,000-340,000 mt in December, up about 1% from November, and is expected to rise further in January as plant operations step up.

Sinopec Zhenhai Refining & Chemical Company, or ZRCC, plans to start up its new 165,000 mt/year butadiene plant in Ningbo in early January, a company source said Dec. 28.

Sinochem Quanzhou plans to restart its 127,000 mt/year butadiene plant in Quanzhou in January after maintenance.

Amid rising production, local China butadiene price also dropped Yuan 200/mt day on day to be assessed at Yuan 4,100/mt, or $558/mt on an import parity basis, Platts data showed. The price is the lowest since July 23, 2020, when it was assessed at Yuan 4,000/mt.

With the weaker butadiene market and the CFR Japan naphtha price benchmark rising $6.75/mt day on day to $742.25/mt, the spread between butadiene and naphtha moved further into negative territory to reach a multi-year low of minus $187.25/mt on Dec. 30.

The spread is much lower than the typical breakeven spread of plus $300-$350/mt for using naphtha to make butadiene, although co-products ethylene and propylene remain profitable.

Amid a bearish market in China, Asian suppliers are continuing to seek opportunities to export outside Asia. Market sources said around 10,000 mt has been fixed from South Korea to the US for January-February.

For the middle of January loading, a 5,000-5,500 mt cargo was heard to have been fixed to the US in the high-$600s/mt FOB Korea, while another 5,500 mt cargo was heard to have been fixed for the middle of February loading on a US contract pricing-based formula.

An arbitrage window from Asia to the US is still open. The location spread between Asia and the US is calculated at $642/mt, higher than a typical freight rate of $300-350/mt, Platts data showed.