Introduction: This week, the domestic butadiene market has shown a stabilizing and fluctuating trend, with prices moving to around 12,650 yuan/ton. Against the backdrop of the recent breakdown in peace talks in the Middle East and an increase in domestic butadiene plant maintenance, market attention is gradually shifting from demand-side dynamics to supply-side changes.

1. Raw Material Supply Issues and Increased Plant Maintenance in June Provide Downside Support

Comparing data from 2025-2026, current weekly butadiene production has largely returned to levels seen in the same period last year, but remains significantly lower than levels observed from Q4 2025 to Q1 2026. Domestic butadiene supply remains constrained. Meanwhile, the price spread between Japanese naphtha and CFR China butadiene has rapidly fallen from the absolute highs seen in March-April and is now roughly at levels near the first half of 2025. Consequently, current butadiene production costs and theoretical profit margins have essentially returned to normal levels comparable to the same period last year. Based on current information, from late May through June, planned maintenance at Yangzi Petrochemical, Shenghong Refining and Chemical, Siangbang Petrochemical, Hainan Refining and Chemical, and a facility in Northwest China is expected to lead to a certain reduction in domestic production and external sales volumes. Furthermore, due to the impact of the current breakdown in Middle East peace talks, which limits crude oil and naphtha supply, butadiene production costs are expected to remain relatively strong, providing some support to market prices.

2. Overall Downstream Demand is Slowly Improving, but Changes Vary by Product

Looking at theoretical profit performance along the value chain, the overall profitability of the butadiene chain has partially recovered. However, by product category, butadiene's current theoretical profit margin is slightly higher year-on-year. Among downstream products, SBR (styrene-butadiene rubber) shows good profitability, while the theoretical profit losses for BR (butadiene rubber) and SBS are relatively small, although currently slightly below year-ago levels. The ABS industry, however, continues to face persistent losses. Changes in theoretical profit margins are also partially reflected in the capacity utilization rates of various industries. Overall, downstream capacity utilization rates for this period remain slightly below year-ago levels. However, following the improvement in BR production profitability, its capacity utilization rate has shown a rapid increase. In the near term, BR capacity utilization still has room for modest improvement, while the recovery pace for other products' capacity utilization is expected to be slower. As a result, the rigid demand for butadiene consumption shows a gradual overall growth trend.

3. Butadiene Trend Speculation Under Supply-Demand Expectations

As the expectation of a long-term impact from the Middle East region gradually becomes clearer, market focus is shifting back to the supply-demand fundamentals. Currently, rigid domestic butadiene consumption is slowly increasing. Meanwhile, import demand from East Asia and Southeast Asia will persist. Concerns over supply tightening due to concentrated domestic butadiene plant maintenance are becoming a key factor driving prices upward. However, the market remains cautious regarding the arrival timing and reallocation flows of European cargo to Asia. Additionally, the butadiene market is short-term influenced by the sentiment in natural rubber and synthetic rubber spot and futures markets, leading to continued cautious purchasing by downstream buyers. Resistance to high prices may constrain price increases. Overall, the domestic butadiene market price is expected to see a slight upward trend in the near term. However, due to uncertainties in market information and sentiment, the price increase may be accompanied by notable fluctuations.