【Introduction】
Entering May, domestic butadiene prices experienced another rapid decline. As of May 8, mainstream market prices fell to around 12,465–12,500 yuan/ton, essentially returning to levels seen at the initial stage of the Middle East military conflict.

1. Market prices fall again; domestic prices return to pre-conflict levels

In May, the Middle East military conflict gradually shifted from high-intensity confrontation to tentative ceasefire and peace talks. The supply-demand dynamics in the crude oil and downstream chemical markets also entered a rebalancing phase. Both domestic and overseas butadiene prices surged then saw a sharp correction. As of May 8, the butadiene price delivered to Luzhong in the Shandong market dropped to 12,450 yuan/ton, while the CFR China price fell to $1,700/ton—essentially reverting to levels seen around March 5 this year.

2. Downstream rigid demand consumption remains in recovery

As of May 7, the domestic butadiene capacity utilization rate stood at 63.76%, down 5.59 percentage points year-on-year, though output only decreased slightly by 0.87% month-on-month. While the utilization rates of some downstream sectors are gradually recovering, except for styrene-butadiene rubber, all major downstream utilization rates have fallen sharply year-on-year. Specifically, the utilization rate for polybutadiene rubber was 54.87% (down 19.87 percentage points YoY); SBS was 31.18% (down 21.98 percentage points YoY); and ABS was 57.45% (down 11.55 percentage points YoY). Although part of the year-on-year decline in downstream utilization rates is attributed to expanded capacity bases in each sector, the magnitude of the decline clearly indicates that downstream butadiene demand is significantly weaker than the same period last year. At present, except for the polybutadiene rubber sector, where utilization continues to rise, recovery in other downstream sectors is slow. The gradual increase in rigid butadiene consumption persists, but demand alone cannot provide strong support for butadiene market prices.

3. Narrowing premium for export deals; domestic-international spread narrows significantly

Around the May Day holiday, the sluggish negotiation tone in China’s butadiene export market improved slightly. During the week, rumors emerged of three export shipments in East China, though negotiated prices were lower than previous levels. As domestic market prices fell sharply, the CFR China price also edged lower, resulting in a notable narrowing of the domestic-international price spread compared with March–April levels.

4. Profit shift downward likely to continue; market price pressure persists

With butadiene prices dropping sharply, the spread between butadiene and its downstream products has widened. Currently, the spot price gap between butadiene and its main downstream product, polybutadiene rubber, exceeds 3,000 yuan/ton. This widening spread provides some bottom support to the declining butadiene market. Overall, given the ongoing loose supply-demand balance for butadiene, the profit distribution along the butadiene chain is likely to continue shifting downward in the near term. After prices reach a phase low, increased buying by downstream buyers will help cushion the pace of the decline.