BDO: current plight and hope in the future

In the one and a half month after the Spring Festival, BDO market has become quieter, transitioning from its prominence in 2021 to a deeper but steadier state. Regardless of its current condition, BDO continues to extend its development and expansion.

Since 2023, BDO has entered a peak period of capacity expansion, and the industry has been under the shadow of competition triggered by capacity expansion. Short-term pressures and the pace of expansion have been mentioned in several articles by CCFGroup, with many market participants taking a bearish stance. There is no doubt that the BDO industry faces short-term pressures. Prices have fallen sharply, and industry profits have turned into losses.

Although the current market is struggling, looking back at the past, the growth in demand for BDO has not been slow.

Comparing the supply and demand growth rates of China domestic BDO in the past five years, the average growth rate of production capacity is about 12%, while the average growth rate of demand has also reached 11%. The demand growth potential of BDO is relatively strong, and it is among the products with medium to high-speed development among many intermediate products.

The increase in demand for BDO is mainly driven by traditional PTMEG and PBT, although in recent years, the markets for PBAT and GBL have also seen improvements, but their volume is still small. With expectations for growth space, the past growth rates have been relatively low, and growth is still expected in the future.

Exports have also grown rapidly, and with little capacity expansion outside China, BDO's export is expected to remain in a high-growth phase for a long time. Over the past five years, the average export growth rate of BDO has reached 45%. In 2020, due to the impact of the pandemic, the circulation of export trade and overseas demand were restricted, but BDO's exports maintained rapid growth.

Considering the development of essential demand and exports, the demand growth resilience of BDO remains strong and continues to trend towards medium to high growth rates. Of course, since 2023, the rapid increase in BDO production capacity has led to pressure from competition, and the industry must face the current difficulties. However, it is believed that there is hope beyond the current difficulties.

Currently, many downstream plans for multiple sets of BDO projects under expansion are in the biodegradable field. However, due to slow progress, most BDO projects can only be digested in traditional demand areas for now. The slow growth in traditional demand areas makes it difficult to quickly absorb the doubling expansion mode of the past two years, leading the industry into a fierce competition pattern. The progress of subsequent new projects may also proceed cautiously. Although the development of biodegradable plastics is progressing slowly, the prospects are vast, and the direction of progress has been continuous, with voices advocating its increase. In addition, with the development of new energy vehicles, there is also significant growth potential in the GBL market, another new field for BDO. The growth and progression of new markets require time, and the industry is expected to move beyond traditional demands and embrace new development opportunities.