BDO: the alignment between cost and supply/demand

After increased in October and stagnated in November, price of spot BDO inched down in actual transactions in late-November and then turned to be in range bound. BDO prices continue to adjust between cost and supply/demand, looking for a relative economic balance point.

The pressure from excessive supply is apparent. BDO capacity accelerates expanding in recent two years. Supply witnesses multiple growth, while the growth of demand side is hard to chase up, especially when the overall downstream demand lacks strong upward momentum.

BDO capacity expands significantly in 2023-2025, with scheduled yearly expanding capacity mainly above 1 million tons, while the startup of some projects are postponed with pressure from sales and cost. Most projects in the second half of 2024 are delayed. Based on market status, the launch of some projects in 2025 is of high possibility to be delayed too.

After capacity increases, BDO factories are burdened by losses. The price of BDO was once lower than the variable cost. BDO plants basically suffered losses throughout 2024. Most companies ran healthily in the first half of year with industrial chain advantage but faced bigger operation pressure under heavy losses in the second half of year, especially after the third quarter.

As companies with heavy losses began to reduce production, industry supply begins to enter a spontaneous adjustment period.

The operating rate of BDO plants greatly descended to near 50% in the third quarter and recovered slightly in November, but some companies started to cut production again in December. The startup of some new projects are postponed. The adjustment of supply side remains.

Later capacity expansion of BDO market will remain large. Burdened by losses, companies may continue easing the supply and demand contradiction. Most factories will limit supply by adjusting the operating rate of units and try to look for an appropriate economic production point by aligning the cost and supply.