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Butanediol Prices Initiate to Rise in Early August Amid Supply Issues and Increased Demand
Butanediol Prices Initiate to Rise in Early August Amid Supply Issues and Increased Demand

Butanediol Prices Initiate to Rise in Early August Amid Supply Issues and Increased Demand

  • 07-Aug-2024 5:25 PM
  • Journalist: Yage Kwon

During the second week of August, Butanediol (BDO) prices in the USA experienced a notable increase of 2%, reaching USD 1674 per metric ton (FOB Texas). This price hike was influenced by various factors, including supply constraints, rising feedstock costs, and heightened demand from downstream industries. The market situation remained bullish, with low to moderate supply levels and moderate to high demand driving the pricing dynamics.

Supply constraints significantly contributed to the price increase of BDO. Additionally, inventory depletion among manufacturers and distributors led to a reliance on spot purchases, further escalating prices. Increased BDO exports to countries like Chile, India, Argentina, and Germany strained domestic supply, with export volumes rising from 2,283 metric tons in April to 5,794 metric tons in May. While the raw material butadiene and n-butane prices remained stable, propylene prices increased by 7.7%, adding to overall production cost pressures.

The global ocean freight market faced considerable challenges due to geopolitical tensions, economic factors, and the ongoing Red Sea crisis. The conflict in the Red Sea led to a 17% increase in capacity on the Asia-Europe route, but effective capacity growth was only 2% due to longer detours around Africa. Labor tensions in European ports, especially in Germany and France, caused congestion to reach an 18-month high, exacerbating supply chain disruptions. Rising spot rates from China led to increased shipping costs and delivery times, impacting the supply and pricing dynamics of BDO in the USA.

Demand for BDO was moderate to high, driven by stabilized growth in downstream industries such as Tetrahydrofuran, PBT, and spandex, which likely outpaced supply and resulted in price hikes. Additionally, seasonal peaks in demand for BDO-based products contributed to heightened consumption during this period.

In a related economic update, the Federal Reserve maintained the federal funds rate at a 23-year high for the eighth consecutive meeting in July 2024, noting progress toward the inflation goal despite its elevation. Economic activity expanded solidly, though job gains were moderate, and the unemployment rate slightly increased. The US manufacturing activities for July 2024 was revised downward, indicating deteriorating business conditions. These factors, along with supply chain challenges, contributed to the upward pressure on BDO prices.

Looking ahead, BDO prices are expected to remain influenced by several factors, including demand and supply dynamics, raw material costs, and global market conditions. The forecasted pricing trend for BDO in the USA indicates potential fluctuations, with a 3% decrease in August, followed by increases of 2% in September and October, and 3% in November. Prices are projected to decline by 2% in December and January.

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