The performance of Asian petrochemical markets this week will be determined mainly by supply forces. The availability of cheaper Chinese cargoes and high inventory levels at the ports could exert downward pressure on benzene, propylene and polypropylene going forward. Meanwhile, tight ethylene and styrene monomer supply will continue to buoy prices this week.
After Asian paraxylene prices fell last week, closing the week amid lackluster buying sentiment, traders were of the opinion that the week ahead could see more aggressive buying interest for fixed price cargo. However, with PX turnarounds in India and South Korea underway, coupled with lower downstream production in Northeast Asia, market participants expect PX prices to be rangebound if there are no distinctive change in fundamentals.
In Asian benzene, prices gained last week, supported by active buying for July and August-loading cargoes. Inventory pressure had also begun to ease as tank inventories in East China stood at 233,900 mt last Friday, down 3,900 mt week on week. At these levels, inventory remained relatively elevated, and players stated that further easing was necessary for prices to really take off. Market participants also noted, “With the benzene arbitrage closed, it will be Asian downstream operating rates driving prices moving forward.”
Meanwhile, in downstream styrene monomer, Chinese prices, which hit a fresh four-year high last week, could dip with buying expected to subside, as short-covering would no longer drive additional buying as the clearing date for May contracts on the Chinese Huaxicun exchange had passed. Nonetheless, prices were likely to remain firm in the next few weeks after inventory touched a year to date low of 26,000 mt last Wednesday, and market participants expected the tight supply situation in China to only ease in the second week of June when plants return from maintenance.
Asian ethylene may see some uplift this week from strong downstream styrene monomer which touched over one year highs last week as a result of supply tightness. Supply will also be constrained by Japan’s JXTG Nippon Oil & Energy shutting its steam cracker, with a 404,000 mt/year ethylene capacity, from June 8-19.
Asian propylene prices are likely to come under pressure this week as the availability of cheaper domestic cargoes continue to dampen import interest. More supply is also expected to come on stream with South Korea’s S-oil plant restart in mid-June.
Asian seaborne polypropylene prices will likely remain rangebound this week as domestic Chinese prices continue to lag that of imported material, dampening import interest. The price difference was heard to be in the range of $30-$35/mt, as firm demand and better netbacks to Vietnam dissuaded overseas producers from lowering their offers to China. Meanwhile, Chinese end-users will look to cheaper domestic cargoes to meet their requirements.
Meanwhile, Asian polyethylene trend this week will continue to depend on the Dalian Commodity Exchange September futures movement. However, macroeconomic moves in the US and China leading to a weaker yuan are expected to dampen LLDPE imports to China going forward, traders said.
–Desiree Quah, firstname.lastname@example.org
–Edited by Norazlina Juma’at, email@example.com