Introduction: You're probably very familiar with this kind of lifestyle: wearing sportswear containing spandex, driving a new energy vehicle powered by a lithium-ion battery, and using biodegradable plastic bags at the supermarket... These seemingly unrelated items all have one thing in common: their raw materials contain a special substance - BDO (1,4-butanediol). As an important basic organic chemical and fine chemical raw material, BDO is used in the production of various products such as spandex, cosmetics, biodegradable materials, and lithium battery solvents, making it one of the fastest-growing chemical products in the world. Against the backdrop of "dual carbon" goals and plastic restrictions, strong demand in areas such as biodegradable materials and new energy batteries has driven 1,4-butanediol (BDO) to become a hot investment commodity, leading to a significant expansion of planned BDO production capacity.

Review of the domestic BDO market trends in 2025

First, let's review the BDO market trends in 2025. According to data from SunSirs, the domestic BDO market in 2025 experienced a pattern of initial decline followed by a rise, and then a sustained decline, remaining generally weak throughout the year. In terms of price, the average price for the year was 8,046.43 RMB/ton, with a high of 8,735.71 RMB/ton and a low of 7,357.14 RMB/ton, resulting in a maximum fluctuation of 15.78%. The price fell by 13.15% from the beginning to the end of the year. Throughout the year, new BDO production capacity continued to be released, while downstream demand failed to keep pace, further exacerbating the supply-demand imbalance. Intense market competition led to sustained downward pressure on prices.

Specifically:

I. Supply side: The overcapacity situation was entrenched, and supply pressure continued to dominate the market.

The industry's overcapacity situation continued to solidify. By the end of 2025, domestic BDO production capacity reached 6.05 million tons per year (including facilities under construction), with an annual output of approximately 2.58 million tons. The overall industry operating rate remained at around 50%. However, there was a significant divergence in operating rates among companies. Integrated enterprises in the Northwest, leveraging their raw material cost advantages, can achieve operating rates of 70%-80%, while small and medium-sized enterprises lacking cost advantages have operating rates of less than 30%, with some facilities even remaining shut down for extended periods.

II. Demand Side: Both domestic and external demand were weak, making it difficult to provide effective support.

Both weak domestic and international demand were dragging down the market. Domestically, operating rates in key downstream industries such as PTMEG (a precursor to spandex) and PBAT (biodegradable plastics) were generally low, with PTMEG operating at approximately 45% capacity and PBAT at only 16.77%, limiting their ability to absorb BDO. In terms of international demand, full-year exports were approximately 220,000 tons, a year-on-year decrease of 45%, while imports were less than 30,000 tons, a year-on-year decrease of 20%. The export market was facing pressure from both EU anti-dumping investigations and low-priced supplies from Saudi Arabia, hindering the alleviation of excess capacity.

III. Cost side: Fluctuating raw material prices created a mixed picture, resulting in limited cost support.

In the BDO production process using the acetylene method, methanol and calcium carbide were important factors affecting BDO costs. The BDO production cost formula is: 1.15 * calcium carbide + 0.91 * methanol + 3,500 (plant labor). The market for calcium carbide, a raw material, was showing a downward trend. Due to orderly power consumption policies in Inner Mongolia and maintenance at some companies, operating stability has decreased, and supply has narrowed slightly, but this has not significantly alleviated the pressure on BDO costs. The price of methanol, another raw material, was showing a weak downward trend, which has reduced production costs for some processes to a certain extent. It is worth noting that, according to calculations (average price of calcium carbide in 2025: 2,584 RMB/ton, average price of methanol: 2,392 RMB/ton), the production cost of BDO using the acetylene method is as high as 8,473 RMB/ton, while the average market price throughout the year remained below the cost line. Production companies were generally facing losses, and the cost support for prices has been significantly weakened by the pressure of overcapacity.

IV. Market Sentiment: The intensified struggle between buyers and sellers solidified a cautious and stagnant market situation.

The cautious sentiment among market participants has further solidified the stalemate. Downstream companies, influenced by their own profitability pressures, adhere to a "demand-driven, price-negotiation-led" approach to BDO procurement. Spot trading is sluggish, with most transactions relying on contract orders, and there is a clear resistance to high-priced raw materials.  Meanwhile, production companies, facing low prices and widespread losses, have limited room for price concessions, creating a stalemate between buyers and sellers. This cautious sentiment has led to a muted market reaction to temporary positive factors; even factors such as plant maintenance and logistics constraints fail to push prices out of their trading range, further exacerbating the market's deadlock.

BDO Market Forecast and Development Trends for 2026

Market Trend Forecast:

In 2026, the domestic BDO market is expected to continue the core pattern of "supply-demand dynamics and low-level fluctuations." Specifically, the market is likely to remain weak but stable in the first half of the year, with prices expected to range from 7,200 to 7,500 RMB/ton. In the second half of the year, with the arrival of the traditional peak season for downstream demand and the continued exit of some high-cost carbide-based production facilities, supply pressure will ease slightly, and prices are expected to see a modest recovery, ranging from 7,500 to 7,800 RMB/ton. The overall price fluctuation for the year is expected to be within 10%.

Development trends:

Technological transformation is accelerating: Against the backdrop of the global green and low-carbon transition, bio-based BDO has become a core competitive area in the industry. A period of concentrated capacity release is expected in 2026, and its market share is projected to increase from the current level of around 12% to over 15%.

Industry structure optimization: High-cost, low-efficiency calcium carbide-based small and medium-sized enterprises will continue to be eliminated by the market, and industry concentration will gradually increase; at the same time, domestic companies will accelerate their expansion into overseas markets such as Southeast Asia and South America to circumvent trade barriers. High-cost, low-efficiency calcium carbide-based small and medium-sized enterprises will continue to be eliminated by the market, and industry concentration will gradually increase; at the same time, domestic companies will accelerate their expansion into overseas markets such as Southeast Asia and South America to circumvent trade barriers.

Policy and trade are reshaping the landscape: Following the official implementation of the EU's Carbon Border Adjustment Mechanism (CBAM), a carbon tax will be levied on imported BDO, forcing domestic companies to accelerate low-carbon technology upgrades; domestic "dual carbon" policies will also drive the industry towards green and high-end development.

Diversified demand structure: In addition to traditional downstream applications, BDO's applications in high-end fields such as electronics (5G equipment), pharmaceuticals (intermediates for disease-fighting drugs), and lithium-ion battery electrolyte additives will continue to expand.  Simultaneously, accelerated infrastructure investment in emerging markets such as Southeast Asia and India is driving demand growth, becoming a new engine for industry demand.

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