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In the first half of 2017, the BDO price as a whole was on a upward trajectory. But from June to August, a period of traditional off season, the price saw a falling trend, with the supply exceeding the demand. And despite the widespread shutdown of manufacturers' facilities for maintenance, the price was still falling. The price stopped declining and remainded stable in December. However, manufacturers have difficulty raising the price due to downstream resistance, only resulting in limited rise in actual transaction price. How the supply and demand will change in the first quarter of 2018 remains to be seen.
Main factors driving the price fluctuation
A. costs side
In the second half of 2017, the prices of domestic methanol and calcium carbide were moving upwarad on a oscillating basis. During this period, the price for methanol was rising steadily, hitting several records highs. With the combined effect of restricted production of coking plants, declining port inventory and gas shortage, the market saw inadequate methanol supply, which gave the price a big boost. Prices of goods from several provinces hit a record high that has not been seen since 2013.
Affected by such factors as environmental inspection and unstable operation of calcium carbide furnaces, production of calcium carbide in main producing areas began to decrease at the start of the second half of 2017.
Besides, the increased production of PVC boosted the demand. Thus, the price of calcium carbide hd strong support. AS the supply continued to tighten, the rise of price was accelerating. In addition to the strains on supply due to low operation rate of calcium carbide plants, which was a result of environmental inspection in July and August, the price rise was more driven by significatn increase in costs.
The impact of environmental check on the chemical industry in 2017 should never be underestimated. In BDO production, the type and amount of wastes produced vary with production processes. At present, wastes produced by dometic BDO facilities can largely meet the national effluent standards if they are enforced strictly, only causing limited pollution. BDO manufacturers that produce methanol and calcium carbide on their own generally pay more attention to environmental protection due to high environmental production tax and other environmental fees.
B. Supply side
C. Demand side
BDO demands are mainly from downstream sectors such as GBL,PBT,PTMEG and PU. It is reported that the GBL industry was significantly affected by the environmental inspection, safety supervision and production restriction. Some manufacturers, especially those in Shandong, could not produce GBL at normal level, which resulted in limited demand for BDO. The PBT industry saw an increase in supply in the second half of 2017. Although some manufacturers performed maintenance in August and September, normal operation of their facilities was resumed later, and some facilities even operated above their capacity. Thus the supply of spot goods increased, and the manufacturers' inventory level rose slowly, leaving them in great pressure of selling off those goods. However, downstream procurement was reduced due to limited consumption. In terms of PTMEG industry, as manufacturers of spandex saw strong sales, their demand for BDO increased by 8%-10% from 2016. The PU industry mainly includes sectors such as slurry, sole resin and TPU. The PU industry(particularly the fields of slurry and sole resin) has entered a period of stable developmen, which mends slowed growth. Further growth will be in TPU, but it will be slower than that in capacity for BDO.