Singapore — Asian petrochemical markets in the week ahead will be largely determined by upstream and downstream factors such as declining crude oil prices, limited upstream supplies and turnarounds.
Paraxylene and benzene markets are expected to remain firm, while methanol and ethylene prices could come under pressure in face of plant maintenance and reduced capacities.
AROMATICS
Asian paraxylene prices remained firm in the face of upstream declines in crude oil, with the declaration date for August-delivery cargoes nearing, even as traders point to a lack of feedstock inventory among purified terephthalic acid makers, a situation expected to carry over into September, when most Chinese PTA plants complete their annual turnarounds.
Sentiment in the Asian benzene market is expected to firm this week, as East China domestic inventory levels begin to trek lower. Stock at East China shore tanks were heard down 4,500 mt on the week at 231,000 mt last Friday. However, market participants had earlier said that normal levels were around 100,000 mt, and it would take some time for inventory levels to normalize.
Despite rangebound trading last week, market participants were heard keen to procure, on expectation that price will move upward amid expansions in Chinese downstream production plants. New supply is only expected to meet this growth in demand in 2020-2021, resulting in bullish sentiment in the short to mid-term future.
Meanwhile, Asia methanol prices in domestic and CFR China may come under pressure this week as downstream methanol-to-olefin end-user Jiangsu Sailboat shuts for a 35-day scheduled turnaround from July 20. The MTO plant consumes up to 2.4 million mt/year of feedstock methanol to produce 800,000 mt of olefins, for its 11 integrated downstream plants, such as ethylene vinyl acetate-to-polyethylene swing units and ethylene oxide, acrylonitrile, super-absorbent polymer and methyl methacrylate plants.
A softening China demand may widen the arbitrage economics from China to Southeast Asia, and expand the volumes redirected from South China to Vietnam, Indonesia, and Malaysia this week, traders said.
OLEFINS
Asian ethylene spot supplies in the region are likely to remain limited for August. Maruzen Petrochemical and Keiyo Ethylene will run their naphtha-fed steam crackers at Chiba at around 70% of capacity for two to three months due to some mechanical problems. Given limited spot supplies, sellers are reluctant to reduce their offer prices. End-users are on a wait-and-see mode, amid intensifying trade tensions between the US and China, as they could be subject to a new, additional 10% tariff.
POLYMERS
In the Asian low density polyethylene market, the outlook is mixed as the feedstock ethylene market is likely to remain tight in the second-half of 2018, amid the steam cracker turnaround season as well as healthy demand in China, and less deepsea supplies, market sources said. Deepsea supplies, especially those heading to Asia from Europe, are also expected to decline in H2, in line with rising ethylene demand in Europe as downstream plant operations return to normal.
Meanwhile, Asian linear low density polyethylene was assessed flat to $25/mt lower this week amid the seasonal demand lull. Producers looking at margins for production planning expect the outlook for H2 to be upbeat for integrated producers. A margin of more than $200/mt for PE is not expected to turn negative in the near term, even after considering a typical naphtha-PE conversion cost of $450-$500/mt, they added.
–Shermaine Ang, [email protected]
–Edited by Norazlina Juma’at, [email protected]
Source: S&P Global Platts
