Is the BDO industry still worthy of investment?

Recently, the domestic BDO market has continued to decline in a wide range. Although the price of methanol calcium carbide at the cost side remains high, and many manufacturers at the supply side have reduced their load for maintenance in August, resulting in strong support for the supply of BDO raw materials. However, with the drop in demand for masks due to the unblocking of foreign epidemics, and the downturn in the apparel industry caused by the domestic epidemic blockade, the main downstream spandex industry continued to decline. The operating rate of Xinxiang chemical fiber spandex has dropped from full load in May to 20-30% today. As a result, the demand side is extremely weak. As of August 11, 2022, mainstream price negotiations in East China refer to bulk water at 9,800-10,000 yuan/ton, and bulk water will be accepted and delivered.

2020-2022Year BDO price chart

According to the database of Tiantian Chemical Network, based on the current market prices of calcium carbide, methanol and BDO, the current industry average loss of BDO is about 800 yuan/ton. If analyzed according to normal logic, the company will not consider investment during this period. However, at the end of August and early September, Zhongtai Meike Chemical and Inner Mongolia Dongyuan Technology will put into production a new 100,000 tons/year and 280,000 tons/year respectively New BDO unit.

The editor speculates that there are three major reasons behind this, one of which is that Meike and Dongyuan Technology are the leading players in the domestic BDO industry, and their production capacity and output are both in the forefront. Further deepen the cost advantage, thereby squeezing small-capacity and high-cost manufacturers out of the industry.

Secondly, compared with traditional petrochemical materials, BDO downstream products are mostly degradable and environmentally friendly materials, and the proportion of such materials in major downstream finished product industries is relatively low. For example, the consumption of TPU materials is only It accounts for 10% of the largest downstream shoe material industry. However, the growth rate of TPU consumption in 2021 will be as high as 20%. Therefore, the BDO downstream industry can be understood as a blue ocean market.

Third, although in the short term the BDO industry’s prices have been falling repeatedly due to the downturn in the downstream, in the long run, as the economic recovery eases demand, leading companies still have good profit margins. And investors should not be limited to the domestic market. Domestically produced BDOs are bound to cause waves in overseas markets due to their price advantages. Therefore, it is not surprising that BDO projects will be implemented in the long run.

To sum up, although the BDO market has shown a slight decline recently, it is still a good piece of fat for powerful large manufacturers in the long run. Therefore, in general, there should be a wave of continuous investment in the BDO project in the next five years.