BDO price strong amid falling operating rate

The operating rate of BDO plants has dropped again, delaying the duration of tight supply. Due to temporary shutdowns of some plants and delays in operating rate increases for others, the operating rate of BDO plants has fallen back to a low level below 50%, and with supply failing to recover, the demand has remained stable for now, failing to ease the supply tightness.

The operating rate of BDO plants has continued to operate at low levels in the second quarter. Although it temporarily recovered to above 50% in the second half of May with concentrated plant restarts, the run rate has remained low between 45%-48% for most of the time. In June, the operating rate increase plans for some plants have been delayed due to factors such as product adjustments, and with the increase in temporarily shutdown plants, the industry operating rate has dropped to around 47%.

There are currently 11 shutdown plants. There are a total of 27 BDO plants in the Chinese mainland, with shutdown manufacturers accounting for approximately 41%. Two enterprises run at capacity below 60%. In other words, nearly half of the enterprises in the BDO industry have their plants either shut down or operating at ultra-low loads. Only 5 plants are operating at 90% or above, accounting for less than 20% of the total number of manufacturers.

The prolonged and large-scale production cuts and shutdowns have reduced the supply of the BDO industry. With the shift in the supply-demand balance, BDO prices have been driven up. The upward trend of BDO has been slow, and negotiations are in a standstill. As mentioned before, under the pressure of losses in downstream products of BDO, cost transmission has been difficult.

As for the future plant plans, although there are still multiple sets of plants scheduled for maintenance in mid-to-late June, most of these are short-term maintenance projects, and their impact on supply is less than that of the major maintenance projects in April-May. However, due to the continuous reduction in supply in the second quarter, the BDO market's supply for June has basically completed ordering. From the perspective of restarting plants, some plants are scheduled to restart from maintenance in mid-June, but in terms of effective supply, a small increase may only begin in late-June, and the supply side may gradually improve after July. Although the price tolerance of BDO downstream remains weak, supported by the supply side, although there is still significant resistance to price increases, the BDO prices may remain strong in short run.