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Butadiene: Import Dependency Continues to Decline
The growth of China's domestic rubber and plastic industries has provided a certain level of support to the butadiene market. In 2008, East China remained the primary market for butadiene, and price trends in Southeast Asia continued to have an impact on the domestic market. The average price this year is expected to be slightly higher than the previous year, with the annual average in East China likely to range between RMB 11,000 and RMB 12,000 per ton. As domestic ethylene and C4 production capacities increase, the supply shortage of butadiene in China is expected to improve, reducing reliance on imports over time.
Butadiene is one of the key petrochemical raw materials, serving as the largest monomer in the synthetic rubber industry and playing a vital role in the production of synthetic resins and other organic chemicals. In 2007, the domestic butadiene market exhibited three main characteristics: prices were volatile with a wide fluctuation range, the annual average price was lower than in 2006, and the difference between the highest and lowest prices reached up to 7,680 yuan/ton. The total available resources increased significantly, with estimated annual output around 1.35 million tons and import volume approximately 110,000 tons. The country’s dependency on imported butadiene has been gradually decreasing. Additionally, prices were closely tied to the Southeast Asian market, where a sharp drop created psychological pressure on domestic producers and traders, leading to frequent price swings.
In recent years, rising international oil prices have supported ethylene prices, and with increasing production costs, it is unlikely that butadiene prices will fall sharply in 2008. Moreover, due to the significant drop in butadiene prices in 2007, there are technical adjustments being made. With the development of the paper and footwear industries, especially the expansion of high-grade highways, demand for SBR and SBS is expected to rise substantially, providing some support to the butadiene market.
Looking ahead, the domestic ABS resin industry still has considerable room for growth, which will help stimulate demand for butadiene. ABS resin is widely used in electronics, light industrial products, automotive parts, agricultural machinery, and pipeline containers. As these industries continue to develop, the demand for ABS resin is expected to grow significantly. Additionally, K resin, known for its high impact strength, toughness, transparency, tin plating capability, and good processing performance, has gained increasing market attention due to its competitive advantages.
However, the butadiene market in 2008 also faced several unfavorable factors. First, it was influenced by the trend in downstream products. Recently, prices for downstream products have been weak, and with producers struggling to absorb high production costs, it is expected that the butadiene market may experience temporary oversupply in 2008, which could limit price increases. Second, capacity expansion efforts could put downward pressure on prices. In 2007, Daqing Petrochemical added a 70,000-ton/year butadiene plant, while Sichuan PetroChina launched a new 150,000-ton/year facility. Guangzhou Petrochemical and Yangtze Petrochemical also started new plants, adding to the overall supply. These new facilities are expected to exert pressure on the market in 2008. Third, macro-control policies and environmental regulations will have an impact on the downstream sectors of butadiene, further influencing market dynamics.