The start of 2026 marks a pivotal policy turning point for China's BDO (1,4-butanediol) industry. On the evening of January 9, the Ministry of Finance and the State Taxation Administration jointly announced the abolition of VAT export rebates for photovoltaic products and related items effective April 1, 2026. As a product within the photovoltaic supply chain, BDO is included in the adjustment list, ending its long-standing reliance on export rebate subsidies. Compounded by the EU's anti-dumping investigation launched in June 2025, this dual policy pressure is profoundly reshaping the export landscape of the BDO industry. The sector is entering a new phase characterized by “subsidy reduction, enhanced compliance, and competitive strength.”

I. Dual Policy Overlap: Pressure on Both Costs and Channels

Cancellation of Export Tax Rebates

The policy explicitly states that the effective date is based on the export date indicated on the export goods customs declaration form. with products declared before April 1, 2026, still eligible for the original rebate policy. This window is likely to trigger a short-term “export rush” as companies accelerate order fulfillment and customs declarations to beat the deadline, potentially boosting export volumes temporarily but unlikely to reverse the industry's long-term trajectory.

For BDO producers, the direct impact of rebate elimination is rising export costs. Based on the previous 9% rebate rate, for every RMB100 of BDO exported, enterprises will receive approximately RMB9 less in tax refunds. The BDO industry is already grappling with depressed prices, with the 2025 annual average price hovering around RMB7,800 per ton—below the production cost of the acetylene-aldehyde process. Widespread industry losses are further squeezed by the tax rebate cancellation.

EU Anti-Dumping Investigation

Concurrent with domestic tax rebate policy adjustments, overseas trade regulatory pressures have intensified. On June 6, 2025, the European Commission formally initiated an anti-dumping investigation targeting BDO originating from China, the United States, and Saudi Arabia. The investigation covers 1,4-butanediol products corresponding to CAS number 110-63-4.

Documents disclosed on January 8, 2026, indicate that provisional anti-dumping duties are scheduled to take effect on February 6, 2026, with significant variations in duty rates across countries: Chinese enterprises face rates ranging from 105.6% to 113.7%, Saudi Arabian enterprises at 52.4%, and U.S. enterprises at 136.1% to 143.5%.

The products subject to provisional duties are 1,4-butanediol originating from the aforementioned three countries, corresponding to EC code 203-786-5 in the EU's existing commercial chemicals list. Under China's commodity codes, these are categorized as 29053926 (biological BDO) and 29053928 (other BDO or fossil-based BDO).

The core focus of this investigation is to determine whether the subject products are being sold below fair value and whether they are causing injury to the EU domestic industry. The investigation period spans from January 1, 2024, to December 31, 2024. Preliminary findings are expected to be announced on January 8, 2026, with a final ruling scheduled for August 5, 2026.

II. Short-Term Industry Shakeout Forces Long-Term Upgrades

Short-Term: Concentrated Negative Impact Accelerates Industry Consolidation

Under the combined effect of dual policies, short-term negative factors will intensify. For small and medium-sized enterprises with high export ratios, low profit margins, and weak bargaining power, the cancellation of tax rebates directly increases costs, while the EU anti-dumping investigation further compresses export opportunities. Some companies may halt production or exit the market entirely due to inability to absorb cost pressures.

Simultaneously, forced increases in export quotations will strain short-term order intake. While rising costs may temporarily ease the industry's “internal competition” driven by low-price bidding, overall survival pressures will accelerate market consolidation.

Impact varies significantly across enterprises: Integrated enterprises in Northwest China leverage raw material cost advantages to maintain 70%-80% operating rates, demonstrating strong resilience. while small and medium-sized enterprises lacking cost advantages already operate at less than 30% capacity. This policy adjustment may accelerate the elimination of outdated production capacity.

Medium to Long Term: Structural Advantages Emerge as Industry Transitions to High-Quality Development

1. Increased Industry Concentration: As inefficient capacity reliant on tax rebates and subsidies exits the market, resources will consolidate toward leading enterprises with advanced technology, controllable costs, and diversified operations, gradually strengthening the industry's pricing power.

2. Accelerated Technology Innovation Implementation: Policy pressures will compel enterprises to shift away from subsidy dependence toward technological innovation and product upgrades.

3. Enhanced Compliance Standards: The elimination of tax rebates reduces potential grounds for international trade friction. EU anti-dumping investigations will also drive enterprises to strengthen compliance management, laying the groundwork for future global market expansion.

As an integrated internet platform providing benchmark prices, on January 12th, the benchmark price of liquefied petroleum gas (LPG) according to SunSirs was 4435.00 RMB/ton, an increase of 1.78% compared to the beginning of the month (4357.50 RMB/ton).

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