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INSIGHT: BDO Demand Increased in September

September 15, 2020
Lower supply and reduced imports from Asia are helping to re-balance the market.

European 1,4-butanediol (BDO) demand increased in September after a rather prolonged period of weakness.

Several factors are contributing to this pick up in demand. First, there is a relative absence of Asian product. For many months and prior to the pandemic, imports from Asia contributed to the oversupply in Europe. But the relative strength in activity between Europe and China seems to have reduced appetite for the European market.

A reduction in supply is also helping to re-balance the market. When demand dropped during the pandemic, supply was reduced to meet the lower demand. And now that demand is picking up, buyers are finding a slightly reduced availability in Europe.

The current increase in demand is also a result of improved activity. Demand has improved in September from most market segments. This in part is to do with seasonal factors, namely that there is always a bounce after the slow summer period.

Another element of demand is restocking. During the ongoing uncertainty and the slow summer, it is understood that many buyers may have run down stocks. And it is not yet clear to what extent restocking is driving current demand.

The ongoing improvements in BDO demand in Europe will most likely prevent further price decreases. If the pace of the recovery is sustained then sellers will try to increase prices. But for now, amid much uncertainty over the virus, the balance of probability is on the side of rollovers in Q4.

Meanwhile, downstream polybutylene terephthalate (PBT) is also improving but Asian imports remain very competitive. The gap between European and Asian prices is wide and significant, at more than €200/mt.