SunSirs: 1,3-Butadiene Prices Rise Over 100% in First Quarter, Reaching Highest Level Since 2017

On April 1, SunSirs’ 1,3-butadiene benchmark price stood at RMB18,066.67 per ton, an increase of 80.79% compared to early March (RMB9,993.33 per ton).

On April 2, the SunSirs benchmark price was 18,333.33 RMB/ton. Although this represented a 3.21% correction from April 1, it remained within a high-range.

In March, the price of 1,3-butadiene rose from approximately 9,993 RMB/ton at the beginning of the month to 18,067 RMB/ton by the end of the month, an increase of over 80%, marking a nine-year high; In the first quarter, the cumulative increase in 1,3-butadiene prices exceeded 118%, reaching a new high since 2017.

Futures Market: The short-term technical pattern for the main 1,3-butadiene rubber futures contract is bullish, but a 5% correction occurred on April 2, with volatility intensifying at high levels.

Supply Side: Global Tightening + Shipping Disruptions

Domestic: Major facilities at Qilu, Maoming, and Sinopec Shanghai are undergoing concentrated maintenance, reducing 1,3-butadiene supply by nearly 1 million tons over the next three months and limiting operating rates.

Overseas: Major producers in South Korea, Taiwan, and Europe have declared force majeure or production halts; geopolitical tensions in the Middle East and shipping disruptions in the Strait of Hormuz, combined with reduced operating rates at cracking units in Japan and South Korea, have tightened Asian supply, leading to a sharp decline in imported cargo arrivals.

Inventories: 1,3-butadiene inventories at East China ports continue to decline and remain at low levels. Spot market liquidity is tight, and suppliers are strongly committed to maintaining prices.

Cost Side: Linked to High Crude Oil Prices

Over 90% of 1,3-butadiene is produced as a byproduct of ethylene from naphtha cracking, creating a strong correlation with crude oil and naphtha prices. Geopolitical tensions in Iran have driven up oil prices, providing firm support on the cost side.

Demand: Peak Season vs. Losses

Peak Season: March marks the traditional peak purchasing season for 1,3-butadiene in the tire and synthetic rubber sectors. Downstream production has picked up, with styrene-butadiene rubber (SBR) and butadiene rubber (BR) prices rising 53% and 57% year-to-date, respectively, and price increases being smoothly passed on.

Pressure: High raw material prices are squeezing margins. Downstream industries such as synthetic rubber and ABS are operating at a loss, leading to procurement driven primarily by small, essential orders. There is insufficient willingness to stockpile in bulk, which is restraining market momentum.

Trade Flows: Export Diversion Exacerbates Domestic Shortages

The spread between domestic and international prices has widened, causing domestic supplies to flow overseas and tightening market liquidity, further reinforcing expectations of price increases.

The capacity structure of 1,3-butadiene dictates that its price is deeply tied to the crude oil supply chain. Over 90% of the industry’s 1,3-butadiene capacity comes from C4 by-products generated during the naphtha cracking process to produce ethylene. Its price correlation with crude oil and naphtha exceeds 90%, and the underlying support for this market cycle primarily stems from the rigid upward pressure on upstream costs.

Due to ongoing geopolitical tensions in Iran and disruptions to shipping through the Strait of Hormuz, the global crude oil supply chain is under pressure. Oil tankers rerouting their routes has driven up shipping costs, pushing the benchmark price of international crude oil higher. These supply chain pressures are being transmitted to the Northeast Asian ethylene and 1,3-butadiene markets. Japan and South Korea, as major buyers of Middle Eastern naphtha, have significantly reduced the operating rates of their cracking units since March. As a C4 byproduct of ethylene cracking, 1,3-butadiene production has consequently contracted, directly leading to a substantial short-term decline in 1,3-butadiene capacity across Asia. Expectations of supply-side contraction have given 1,3-butadiene prices a rigid characteristic where they are prone to rise but resistant to fall.

Short Term: Supply constraints are unlikely to ease rapidly, while the peak season for downstream demand continues. Prices are likely to fluctuate at elevated levels, with any pullbacks considered normal volatility; however, market participants should remain vigilant regarding the risk of supply improvements stemming from plant restarts following maintenance and easing shipping constraints.

Medium Term: Key factors to monitor include the commissioning of Iranian facilities, the progress of overseas plant restarts, and crude oil price trends. If downstream margins remain inverted, further production cuts may occur, potentially leading to pressure on the demand side.

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