The pricing logic of butadiene, a byproduct of ethylene cracking, is primarily governed by cost fluctuations in cracking units, its own supply-demand fundamentals, and constraints on profit distribution across the value chain. In 2026, escalating cost burdens, supply contractions, sluggish demand, and impaired profit transmission—triggered by geopolitical turmoil in the Middle East—have led to severe price volatility throughout the industry chain.

Cost Transmission: Butadiene's production cost is determined by the entire chain from crude oil to naphtha to ethylene cracking, with prices across these four elements showing a strong correlation. As a byproduct of ethylene cracking, butadiene lacks independent production facilities, so it cannot be strictly defined as a cost-transmission-driven product. However, its production cost is inseparable from the cost pass-through along the crude oil-naphtha-ethylene cracking chain. The transmission logic can be broadly summarized as follows: international crude oil price fluctuations directly influence the naphtha price center, while naphtha price changes affect domestic refiners' cracking unit costs and overall profitability, thereby influencing cracking unit operating rates. According to Zhuochuang Information monitoring data, since 2026, the correlation coefficients between butadiene prices and crude oil, naphtha, and cracking unit costs have been 0.75, 0.82, and 0.77 respectively, falling within the strong correlation range. The data also indicates that since 2026, the fluctuation trend of butadiene prices has been largely consistent with international oil price movements.

Supply Transmission: The process structure determines that butadiene production is highly dependent on cracking unit operation. As a co-product generated during ethylene production, butadiene is mainly obtained through extraction from the C4 fraction produced during naphtha cracking, with this process accounting for over 90% of total butadiene output. Unlike other products, butadiene production volume is not determined by market demand or its own production profitability, but rather by refiners' crude processing volumes and the operating rates of ethylene cracking units. Since the Middle East geopolitical events at the end of February 2026, crude oil and naphtha imports have been disrupted, prompting refiners to prioritize gasoline and diesel supply, leading to downward adjustments in cracking unit operating rates. Although subsequent US-Iran tensions saw repeated fluctuations and cracking unit operating rates recovered slightly, overall operating rates remain below pre-event levels. Consequently, butadiene production has correspondingly declined. The data reveals that butadiene supply is highly dependent on cracking unit operating rates, though two periods show divergence. The first period, from November 2025 to February 2026, saw butadiene output moving inversely to cracking unit operations. This can be attributed to new capacity contributions—38万吨/年 (380,000 tonnes/year) from Yulong Petrochemical Phase II and Guangxi Petrochemical—which boosted butadiene output beyond what cracking unit conditions would suggest. The second period, since May 2026, has seen butadiene production growth outpacing cracking unit operating rate increases. This is primarily because butadiene's high profitability attracted the restart of butene oxidative dehydrogenation units at Jiangsu Sailboat and Nanjing Chengzhi. Therefore, cracking unit operating rates influence the overall supply trend of butadiene, while the startup and shutdown of butene oxidative dehydrogenation units, timing of new capacity additions, and occasional export fluctuations serve as key factors affecting short-term supply.

Demand Transmission: Downstream and end-product operating rates and profitability shifts determine butadiene demand. The demand transmission within the butadiene value chain follows a reverse path from end-user consumption to upstream raw materials, centered around production and sales in tire and home appliance sectors, coupled with synthetic rubber profitability and operating rate changes, ultimately feeding back to influence butadiene prices and supply-demand dynamics. The 2026 price anomalies in the butadiene chain have been primarily cost-driven from upstream; however, the magnitude and sustainability of price increases are mainly determined by demand-side performance. In the tire segment, 2026 has seen slight production growth in all-steel tires driven by original equipment market expansion, while semi-steel tire output has declined due to contractions in both export and OE markets. Under these conditions, tire market production and sales only provide a floor for butadiene and downstream synthetic rubber demand, without strong upward momentum. In the home appliance sector, the diminishing effect of national subsidies and pre-loaded replacement demand from trade-in programs have led to simultaneous declines in production and sales across the three major appliance categories, equally failing to support ABS demand growth. Since 2026, monthly ABS consumption has shown a fluctuating downward trend, providing no boost to butadiene demand. Within the synthetic rubber segment, the combination of high costs and weak demand has intensified production pressure, causing profitability divergence across the value chain. The high profitability of butadiene feedstock has struggled to transmit downstream to synthetic rubber, and overall synthetic rubber operating rates have declined, signaling obstructed volume and price transmission along the chain. Consequently, even with strong cost support from elevated crude oil and naphtha prices, the lack of incremental demand drivers from downstream and end-use sectors has constrained the magnitude and duration of price increases in the butadiene chain, resulting in sharp rallies followed by rapid corrections during the year.

In summary, butadiene price movements are influenced both by upstream crude oil price fluctuations and constrained by its own supply-demand relationships and downstream profit transmission capabilities. In 2026, international oil prices have largely tracked developments in Middle East geopolitical situations, with overall stronger price performance elevating butadiene's cost base. Shipping disruptions have reduced crude oil imports, affecting cracking unit operating rates and causing butadiene output to decline, thereby supporting prices. However, the lack of incremental demand from tire and home appliance end-markets has suppressed synthetic rubber demand, preventing smooth profit transmission from butadiene downstream to synthetic rubber, which has limited the price upside and sustainability across the chain. In the near term, the Middle East geopolitical issues are unlikely to be resolved smoothly, implying continued instability in international crude supply, with prices likely to maintain a stronger adjustment trend and cost-side support for butadiene prices persisting. On the supply side, domestic and international cracking unit operating rates remain low, impacting butadiene production and import volumes, with tight spot availability in the market supporting prices. On the demand side, most downstream industries are operating at reduced rates, and some synthetic rubber units have maintenance plans in September, which may constrain the upside for prices. Key factors to monitor include progress in Middle East geopolitical situations, cracking unit operating rates, and the commissioning of new production facilities.