Tightening supply and demand in China and East Asia boosted butadiene prices, which rose more than expected.

Lead: This week, butadiene prices in the domestic market rose notably, with the price increase significantly outpacing gains in both upstream feedstock and most downstream products. The price uptick was driven on one hand by high volatility in crude oil prices stemming from uncertainties surrounding Middle East conflicts, and on the other hand by expectations of a tightening domestic supply-demand balance, as well as substantially higher transaction prices reported for certain export cargoes in the mid-to-late part of the week.

Table 1: Weekly price overview of butadiene and related products

Data source: Chempricehub Information

During this period, domestic butadiene prices fluctuated initially before rising sharply. Supply support came from a temporary turnaround at a plant in the North China region, while slower-than-expected cargo pickup by some sellers further tightened available spot supply. Additionally, news of high-priced export deals for domestic cargoes circulated mid-week, reinforcing sellers' reluctance to lower offers and pushing spot quotations steadily higher. On the demand side, capacity utilization at major downstream BR and SBR producers remained largely stable, sustaining routine butadiene procurement. Although SBS and ABS sectors continued to operate at a loss, showing resistance or adopting a wait-and-see stance toward high prices due to elevated feedstock costs and sluggish finished-product sales, the scarcity of low-priced spot cargoes pushed the spot negotiation focus upward.

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As mentioned above, recent reports of high-priced export transactions for domestic butadiene cargoes have been an important factor driving domestic price increases. During the week, several batches of September-loading cargoes from East China were heard to have concluded at approximately USD 1,410–1,420/ton FOB China, notably higher than domestic prices. The main reasons behind the high export prices include low inventory levels in South Korea, reduced production rates, delays in European cargo shipments, and some minor production issues—all contributing to increased South Korean procurement demand. Additionally, there are reports that Lotte Chemical is considering permanently shutting down its naphtha-fed steam cracker in Daesan from early September, and the anticipated decline in future butadiene output has further spurred follow-through external purchasing demand.

Looking ahead to next week, uncertainties surrounding Middle East conflicts are expected to keep crude oil and naphtha prices volatile, providing underlying cost support. On the supply side, a short-term turnaround unit in Shandong is scheduled to restart, which should slightly ease the tight spot supply situation in North China. Additionally, the butadiene unit at Shenghong Refining & Chemical is expected to restart in late August, bringing a modest increase in overall supply. On the demand side, several downstream plants in East China are scheduled for short-term turnarounds and restarts from late August to early September. Combined with the higher export prices for small volumes of butadiene, some market participants remain cautiously concerned about potential supply tightening. Moreover, with industry chain profits currently concentrated at the butadiene segment, downstream production margins are under pressure, and persistent sales difficulties in the SBS and ABS sectors continue to weaken downstream willingness to procure high-priced feedstock, with expectations of slight reductions in some downstream operating rates. Overall, butadiene prices are expected to maintain a narrow, firm-to-strong fluctuation trend next week, with Shandong Luzhong delivery prices projected in the range of CNY 10,900–11,400/ton. Market participants will closely monitor developments in domestic and international supply-demand dynamics for further direction.