This week in Asia’s petrochemical markets, most market participants will have their focus on India. This is the first week the country’s plethora of multi-tiered state and central taxes are subsumed under a single-tax structure: the GST.
Primary polymers, such as polypropylene, polyethylene and polyvinyl chloride, will be taxed 18%, while finished polymer-based goods used in packaging and for “conveyance,” such as bags, will also fall into the 18% category, according to India’s GST Council.
According to S&P Global Platts’ analysis, a typical polymer supply chain shows that the effective tax rates for larger converters previously paying VAT will save up to 4% post-GST, while smaller converters previously exempt from VAT will likely have to pay more under the new rules.
Meanwhile, in China, no consumption tax was imposed on imported mixed aromatics, although some market participants were heard to have bought an excess of cargoes on anticipation of it.
AROMATICS
Trading activity remained subdued in the Asian toluene market on weak downstream demand. In China, wide availability of competitively priced alternative gasoline blending components, such as MTBE and off-spec isomer mixed xylenes, also weighed on demand for toluene.
In the FOB Korea market, the widening benzene/toluene price gap, at above $150/mt, could support price gains in toluene despite narrowing naphtha/toluene prices in coming days, a market source said. The FOB Korea marker was up $7/mt from last Thursday to $588/mt FOB Korea on Friday.
East China inventories were up 13% from the previous week at 85,000 mt, while South China inventories fell 36% at 7,000 mt week on week. The CFR China marker rose $7/mt from last Thursday to $612.50/mt, supported by gains in upstream crude oil futures.
Meanwhile, styrene inventory levels in East China fell to the lowest level since January 13 this year, at 51,600 mt last Wednesday, down 27.3% week on week. Downstream prices were firmer, lending further support to SM prices.
As a result, stronger buying demand for July pushed Asian SM up $35/mt week on week, althought it dropped $6/mt day on day last Friday at $1,143.50/mt CFR China and $1,118.50/mt FOB Korea.
Lending more strength to the Asian SM market this morning, EU spot styrene last week reached the highest level since early-April.
Prices surged $70/mt on the back of an unexpected production issue at Ellba’s SM unit in Moerdijk, in the Netherlands.
OLEFINS
Butadiene spot prices rose $60-$65/mt last week on firmer domestic prices in China. Discussions centered on late-July cargoes amid market concerns of tight availability.
However, some resistance was seen from the downstream derivative markets on Monday.
East China offers hovered at Yuan 8,900-9,000/mt delivered, or about $1,100-$1,113/mt on an import parity basis, down about Yuan 100-200/mt from last week. “The butadiene price is a little cool [Monday],” a synthetic-rubber producer said.
On the other hand, the Asian ethylene market made a U-turn from its rising trend, as it posted a $30/mt day-on-day decline, which was also a $30-$40/mt week-on-week fall.
The tight supply situation in Northeast Asia eased after Korea Petochemical Industry Co. achieved on-spec ethylene production from its 800,000-mt/year steam cracker in Onsan.
The ethylene market in Asia looks balanced this week, as supplies from the Middle East are seen to be increasing, especially from Saudi Arabia, although spot demand has been strong.
Platts data showed that the Asian SM margin was at around $100/mt this week.
POLYMERS
Asian polyethylene prices fell last week on lower fresh offers from major producers and a manufacturing lull, while Asian polypropylene prices dropped on lower demand and a more active domestic market.
This week, PE and PP markets are expected to stay bearish in North Asia, while in South Asia, volatilty is expected with market participants reacting to India’s GST regime.
MTBE, METHANOL
Tradable levels for July-arrival cargoes from Singapore into Malaysia were heard at premiums in the high-$20s/mt to the Mean Of Platts MTBE assessments on a CFR basis.
On the supply side, Sinopec-Huntsman’s 742,000-mt/year joint venture at Nanjing, in Jiangsu province, has started production and is expected to ship its first cargo this week.
Last week, Asian MTBE prices fell $3.50/mt to $568.50/mt FOB Singapore Friday, tracking a decline in gasoline prices, while the Mean of Platts FOB Singapore MTBE marker rose $11.50/mt week on week, tracking a recovery in crude oil futures prices.
Methanol prices were mixed last week, as the CFR China marker rose $5/mt to $275/mt, while the CFR Taiwan marker remained unchanged at $275/mt.
The CFR India marker had inched down $3/mt to $240/mt on GST-related uncertainties.
The futures market rose the most, by $7/mt to $273/mt, which could cause a tightening in Ausust supply.
