Asia petrochemicals outlook, w/c May 7

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Petrochemical market participants will be keeping a close eye on developments upstream this week, particularly the fate of the US- nuclear agreement and its impact on crude , which in turn will influence aromatics and MTBE markets.

Supply availability will likely continue to weigh on ethylene markets, while limited supply is set to buoy prices of propylene and butadiene.

AROMATICS

Asian paraxylene prices have risen over the past week after the industry-negotiated Asian Contract Price for May failed to settle.

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Prices are likely to continue to find support this week in a surge in spot transactions for June and July parcels and firmer purified terephthalic acid markets.

“All PTA plants in have restarted and most are running stably, however we don’t see the same evidence regarding the new PX plants, meaning demand has gone up while supply looks tight,” a producer source said.

Asian benzene prices were stable to lower last week, with aggressive selling pressuring down prices early in the week before the market improved after July FOB USG prices rebounded last Thursday.

Market participants last Friday said an earlier open arbitrage meant a lot of cargoes were expected to arrive in the US in May, but it had since closed and there was unlikely to be any support from deepsea markets for Asian cargoes this week.

Bids for June and July loading cargoes supported prices Friday, with June last bid at $839/mt FOB Korea and July at $842/mt.

Demand this week was seen to remain weak due to high inventory, and supply of coal-based benzene remains an alternative.

Prices in the upstream toluene market remained on an uptrend last week, further narrowing the toluene-benzene spread and pressuring toluene disporportionation (TDP) margins.

This has raised questions about the sustainability of toluene prices this week, especially as inventory levels at east China ports rebounded 52% to 38,000 mt last week from a multi-year low of 25,000 mt the week before. Nonetheless, prices remain relatively competitive compared with feedstock naphtha, which will offer some support this week.

OLEFINS

Deepsea arrivals are likely to add to downward pressure on Asian ethylene prices this week as US ethylene prices continue to hover at record low levels, likely spurring more imports to Asia, adding to downward pressure on prices. Asian propylene prices picked up last week on an increase in downstream acrylonitrile and polypropylene segments, which spurred restocking needs. Prices will likely remain supported this week as spot availability appears tight on the back of plant maintenance in China. Asian butadiene prices were flat last week amid tight spot supply and lackluster downstream demand. The limited supply prompted major Chinese domestic producer Sinopec to raise its ex-works butadiene offers by Yuan 500/mt, but negative margins in the styrene-butadiene has prompted producers to lower their operating rates in May. Consequently, prices will likely remain rangebound this week.

MTBE

Asian MTBE prices were depressed further last week by selling interest emerging during the Platts Market on Close assessment process. As FOB Straits prices begin to diverge from a healthy China market, some buyers were heard to be eyeing the possibility of an arbitrage window to China opening this week.

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