SunSirs: 1,3-Butadiene Prices Rose Initially in July Driven by Costs but Fell Back due to Demand-Side Pressure

Price trends

According to the Commodity Market Analysis System of SunSirs, the domestic 1,3-butadiene market experienced a trend of rising followed by falling in July 2026; prices climbed from 8,866.67 RMB/ton to 9,900 RMB/ton, marking an increase of 11.65% over the period. In the first ten days of the month, bullish sentiment intensified—driven by cost-side support and tightening spot market liquidity—pushing prices steadily upward. However, as raw material costs rose, downstream purchasing power weakened, and trading activity for high-priced supplies cooled. By mid-to-late July, the cost-side boost faded and negative feedback from downstream sectors emerged; willingness to chase higher prices waned rapidly, causing the market to retreat from its highs. The month was characterized by a tug-of-war between upstream and downstream sectors; the price rally lacked sustained support from end-user demand, leading to a correction driven by fundamental pressures after the initial surge.

Market analysis

Cost perspective:

International crude oil prices fluctuated significantly in July, directly influencing the price trends of steam cracking feedstocks such as naphtha. Early in the month, crude oil prices strengthened amidst volatility, driving up naphtha prices and raising production costs for ethylene cracking units; this provided a solid price floor for 1,3-butadiene and served as a key driver for market gains. By mid-to-late July, the upward momentum for crude oil faded and prices retreated; cracking feedstocks weakened in tandem, causing cost-side support to gradually diminish. Meanwhile, price spreads between 1,3-butadiene and its upstream and downstream products continued to narrow, prompting refining and chemical enterprises to adjust cracking severity to optimize output, which further impacted the volume of marketable 1,3-butadiene. While cost fluctuations drove shifts in market sentiment, cost-related bullish factors alone were insufficient to sustain a continued market rally; ultimately, the market struggled to maintain high price levels due to supply-demand fundamentals. As of July 28, the settlement price for the September contract of US WTI crude oil futures stood at $79.26 per barrel, while the settlement price for the October contract of Brent crude oil futures was $82.08 per barrel.

Supply Side:

Domestic 1,3-butadiene supply in July followed a pattern of initial contraction followed by a gradual recovery. Early in the month, domestic steam crackers entered a maintenance cycle, leading to reduced industry output; this, combined with limited replenishment from imports and tight spot market availability, strengthened producers' resolve to maintain prices, thereby supporting an upward trend. As some units resumed operations later in the month, domestic supply increased steadily. The flow of overseas material remained flexible, and the potential for external inflows continued to cap the market's upside potential. Overall inventory levels fluctuated; the price support previously provided by low inventories gradually weakened, making it difficult to sustain high price levels.

As of July 29, the listed price for 1,3-butadiene at Sinopec's sales subsidiaries is 10,000 RMB/ton, an increase of 1,000 RMB/ton from the 9,000 RMB/ton price in effect on June 30.

Dongming Petrochemical's 50,000-tonne/year 1,3-butadiene unit is operating normally; 280 tonnes are being offered for external sale with a base price of 9,900 RMB/ton.

Satellite Chemical's 90,000-tonne/year 1,3-butadiene unit is operating normally; 224 tonnes are being offered for external sale with a starting price of 10,000 RMB/ton.

Demand Side:

In July, domestic demand for 1,3-butadiene exhibited a pattern of "marginal recovery early in the month followed by a continued weakening mid-month." Overall "must-have" demand lacked resilience, and there was no significant boost from concentrated restocking. Early in the month, with feedstock prices at low levels, production margins for various downstream products improved and plant operating rates saw a slight uptick; this drove a temporary surge in feedstock purchasing and pushed prices higher. However, as 1,3-butadiene prices spiked rapidly, cost pressures mounted across the entire industry chain. The inability to effectively pass costs on to downstream products, combined with weak end-market orders, once again squeezed industry profitability. Resistance to high prices intensified across the market, with enterprises generally limiting purchases to immediate, essential needs. This lack of sustained inventory building acted as a key factor constraining further price increases and driving a pullback from the highs.

As key downstream derivatives of 1,3-butadiene, poly1,3-butadiene rubber (PBR) and styrene-1,3-butadiene rubber (SBR) saw a recovery in production margins early in the month when feedstock prices were low; the restart of certain production units drove a surge in raw material procurement, pushing 1,3-butadiene prices upward. However, as 1,3-butadiene prices continued to climb, cost pressures on rubber products intensified sharply. With the tire industry in its traditional off-season and orders for finished products remaining weak, rubber manufacturers struggled to pass on costs, leading to a renewed compression of processing margins. Downstream purchasing reverted to a "need-based" pattern, halting large-scale stockpiling and reflecting significant resistance to high raw material prices. As of July 29, the SBR market in the Jiangsu-Zhejiang region was trending downward due to weak conditions. With international crude oil prices retreating from highs and downstream buyers limiting inquiries to immediate needs, SBR sellers slightly lowered their quotes; mainstream offers for the 1502 grade from Fushun, Lanzhou Petrochemical, and Yangzi Petrochemical currently stand at 13,450–13,600 RMB/ton, while Qilu Petrochemical's 1502 grade is quoted at 13,550–13,700 RMB/ton. Supply-demand fundamentals are under increasing pressure: domestic synthetic rubber plant operating rates remain above 66%, ensuring ample market supply, whereas the downstream tire industry is operating at low levels due to the traditional off-season.

Market outlook

Assessing market fundamentals for July, the 1,3-butadiene market remains in a tug-of-war between supply and demand in the short term; downstream resistance to high prices—following earlier gains—has yet to subside, suggesting the market will likely undergo a period of consolidation. Fluctuations in crude oil and cracker feedstock prices continue to influence the cost floor, while domestic plant maintenance schedules and the pace of imported cargo arrivals keep spot supply volatile. Key factors to monitor going forward include operating rates at downstream synthetic rubber and ABS plants, as well as the pace of inventory restocking as the tire industry emerges from its off-season. Should downstream demand fail to recover while supply continues to normalize, the market will face continued downward pressure; conversely, if downstream profitability improves and triggers a wave of concentrated restocking, prices could find support and stabilize. The medium- to long-term outlook hinges on the rebalancing of upstream and downstream profit margins and the extent to which demand materializes during the traditional peak season.

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