BDO turnaround season gives limited support

The demand side has entered the traditional off-season. Although the demand during peak and off-peak seasons has been leveling off in recent years, due to a substantial increase in supply and the pressure of losses, the scheduled maintenance of BDO plants came relatively early this year, with a significant intensity in the maintenance shutdown.

Since early July, the maintenance shutdowns reducing production capacity of BDO units have been coming in succession, leading to a rapid decrease in the operating rate of the BDO industry, which has already approached around 50%.

Listed below are the BDO units in China that have been shut down or have confirmed plans for shutdown in June and July. Starting from mid-June, BDO has entered a concentrated maintenance season.

From mid-June to mid-July, the additional capacity shutdowns have reached 1.27 million tons/year. Additionally, there are some capacities with planned maintenance without confirmed timing or duration, adding up to approximately 416,000 tons of units with maintenance plans apart from those listed. Combined with the capacities that have not resumed from earlier shutdowns, the current operating rate of the BDO industry has dropped to nearly 50% of operation.

The main factors leading to widespread shutdowns not only involve scheduled maintenance, but also include production and sales pressure as well as the pressure of losses of BDO plants.

In the first half of the year, the BDO industry has been continuously experiencing losses, resulting in significant operational pressure for businesses. However, with the release of additional capacity, the industry is facing increased competition, maintaining its pressure around the break-even line.

As June approaches and the season changes, the industry enters the traditional off-season, leading to a slight decrease in demand. Looking at the operating rates of mainstream sectors like PBT and PTMEG, cutbacks in production have started to rise in June and July, with an overall operating rate decline of 5-10%. This has exacerbated an already oversupplied market for BDO, increasing business inventories. Preliminary statistics show that inventories for some BDO enterprises exceed one month and for a few, even reach 2-3 months.

With high inventories and abundant supply, significant production cutbacks have been implemented. While this has temporarily alleviated the market demand-supply imbalance and made short-term improvements to the supply-demand situation, it is challenging to reverse the supply-demand pattern. Despite substantial production reductions, BDO prices remain low, unable to shift the price focus upwards.