Entering June, the domestic butadiene market once again experienced a sharp decline. Although the number of butadiene unit maintenance shutdowns in East and South China has increased recently, downstream producers, plagued by poor production profitability and persistent pressure from finished product shipments, have continued to adopt a passive procurement stance toward raw materials. This has made it increasingly difficult for suppliers to offload their inventory. As of June 11, the mainstream market price had fallen to around 10,525 yuan/ton, essentially returning to the level seen in the early stages of the Middle East conflict.
In the second quarter of 2026, domestic butadiene prices generally followed a two-stage downward trajectory. Entering late May, as maintenance plans for domestic butadiene units gradually materialized, the market's expectations for reduced domestic supply were largely priced in. Attention then shifted to whether downstream demand absorption could keep pace. As the persistent passive procurement sentiment downstream increasingly pressured the butadiene market's negotiation focus, major suppliers gradually reduced prices to facilitate sales, leading to a continuous and sharp decline in market prices. Looking at the mainstream market price trend, as of June 11, the delivered price in central Shandong (Luzhong) had fallen by a cumulative 1,250 yuan/ton from the end of May, a decline of 10.62%.
As of June 11, the weekly capacity utilization rate for domestic butadiene stood at 64.02%, down 4.96 percentage points year-on-year. This rate remains slightly below the average of the past two years. While capacity utilization for major downstream butadiene derivatives has recovered somewhat recently, it is still at a low level compared to the same period last year. Notably, the SBS, SBR, and ABS industries saw year-on-year declines in capacity utilization of 31.31, 6.44, and 5.98 percentage points, respectively. Only the BR industry saw a year-on-year increase of 4.23 percentage points. This low capacity utilization directly reflects that current demand remains weaker than expected. Examining theoretical production profit trends across the industry chain, profits are still heavily concentrated in the butadiene segment. Although profits have recently shifted slightly downstream, with butadiene production margins contracting noticeably while downstream synthetic rubber product margins have recovered to varying degrees, ABS production margins continue to deteriorate. The difficulty of significantly boosting downstream capacity utilization through improved production margins persists.
As the intensity of the Middle East military conflict gradually decreased and substantive peace negotiations began, tensions in the crude oil market eased. Although supply issues have not completely dissipated, the overall price center has trended downward. Simultaneously, as naphtha resources and butadiene imports from other East Asian countries have been supplemented, and the process of rebalancing supply and demand in the region has progressed steadily, the previously tight supply-demand situation for butadiene in China and the broader East Asian region has improved significantly. Consequently, the urgency to procure butadiene resources from China has notably diminished. Recently, while a small number of export deals have been heard, the significant price declines for butadiene in Asia and mainland China have kept market prices at relatively low levels.
Following the sharp drop in butadiene prices, production costs for major downstream synthetic rubbers have fallen significantly, further alleviating the issue of poor profitability. However, downstream producers still face pressure from finished product shipments, and ABS production continues to suffer substantial losses. It is expected that capacity utilization rates downstream will struggle to improve in the near term. With no incremental growth in rigid demand, slight downward pressure on market prices will persist. However, as prices have fallen to a cyclical low, downstream buyers have gradually begun to step in, temporarily stabilizing butadiene and halting its decline. Short-term support is relatively apparent. Nonetheless, over the medium to long term, as expectations for a de-escalation of the Middle East military conflict rise, market demand for butadiene downstream products and end-use sectors will remain the primary factor influencing price trends.
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