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Insight | Time: Jan 12 2023 2:05PM  Editor:Tina Kong
BDO producers face reducing losses supported by demand
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With changing pandemic prevention and control policy in Dec, market players were cautious at first but turned to face it calmly now. Many infected insiders have gradually recovered in late-Dec. Market players' mindset altered, strongly expecting demand to recover after the Spring Festival holiday. Current feedstock price was low, especially BDO under losses. Low-priced feedstock attracted the middlemen and downstream plants to replenish. The restocking of many links pushed up the operating rate of BDO downstream plants.


The operating rate of PTMEG plants recovered apparently in end-Dec and that of spandex producers started rising obviously in Jan. Increasing fabric mills cut or suspended production but stocks of spandex decreased prominently driven by the replenishment. Spandex plants showed higher production activity with low cost, low inventory and the expectation of demand. The operating rate of spandex plants has been increased to around 70% from below 60%. Some plants are still ramping up run rate. The operating rate of spandex plants is likely to rise by near 20 percentage points by mid-Jan compared with end-Dec strongly supported by the growing demand.


The increase of BDO plants鈥 operating rate was limited. On one hand, BDO plants were not very willing to ramp up run rate under losses. Some plants have not restarted production temporarily. Price of BDO started bottoming out from Dec but BDO plants were still under deficit. On the other hand, the operating rate of some plants was low due to the energy supply and unit issue.


With inadequate supply and good demand, sales of BDO under low price reduced. BDO plants gradually raised price to near the cost line. Spot supply of BDO has been tight amid insufficient supply and growing demand.


Some demand expectation after the Spring Festival holiday has been incarnated in the recent replenishment. The post-holiday demand may stimulate the whole value chain to see a good start, but the increase may be slow. The replenishment from the middlemen and downstream plants may be acted as a buffer for the post-holiday market trend. In addition, supply of BDO is expected to gradually recover after price rose after holiday and the supply tightness is likely to be mitigated.

[RISK DISCLAIMER] All opinions, news, analysis, prices or other information contained on this report is provided by analyst of Zhejiang Huarui Information Consulting Co., Ltd (CCFGroup) as general market commentary and does not constitute investment advice. CCFGroup will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
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