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Asia: The week in petrochemicals

Font Size: [Big][Mid][Small] 2017-7-25    Views: 828    
Sentiment in the Asian petrochemical market was largely seen bullish this week due to healthy demand from downstream users. 

Prices for most petrochemicals rose last week on shorter supply due to sudden outages, although the affected plants have since returned to normal production. 

One of those outages was at South Korea's Hanwha Total Petrochemical plant, which was shut last Monday due to a lightning strike. It was heard running at 100% of capacity after a restart over the weekend. 

LG Chemical's steam cracker in Yeosu was also heard to have been disrupted by a minor power cut last week, but operations have since been restored. 

In Kuwait, Equate Petrochemical Co. restarted its ethane cracker and 450,000 mt/year styrene plant at Shuaiba last Tuesday following an unplanned outage on July 8. 

Meanwhile, China was heard to have shut several plants in northern provinces due to non-compliance with environmental regulations, lending support to prices due to the impact on supply. 

AROMATICS 

Paraxylene markets were firmer last week amid strengthening in upstream markets, with naphtha rising $4.38/mt in the week and crude showing indications of an upturn. 

However, there was a sudden bearish turn in downstream purified terephthalic acid futures in China, which retreated more than 3% in the week after a recent bull run. This capped the increase in Asian PX at $2/mt week on week to $789.67/mt FOB Korea and $807.6/mt CFR Taiwan/China last Friday. 

Styrene monomer prices in China's domestic market also fell Yuan 220/mt week on week as participants remained on the sidelines amid talk of oversupply. 

Reports of 35,000-40,000 mt of US-origin deepsea cargo loaded in May set to arrive in China over end July-early August, as well as the impending shutdown of several SM downstream plants in eastern Shandong province for a month from mid-July due to environmental compliance violations, compounded sentiment that supply in August and September could be higher than anticipated. 

The backwardation between August and September widened to $27-$30/mt last Friday from $15/mt the week earlier. Interest for September remains lukewarm, and market participants expect the backwardation to widen further in the next few days. 

The expectations saw SM dive $18-$22/mt week on week to $1,163.50/mt CFR China and $1,141/mt FOB Korea last Friday amid pressure from falling prices globally and anticipation of a rise in supply from the US in September. In Europe, Ellba has lifted its force majeure on supplies from its propylene oxide styrene monomer plant at Moerdijk in the Netherlands, prompting more arbitrage cargoes to be discussed for Asia for September delivery. 

OLEFINS 

Market sentiment in the Asian ethylene market was stable last week due to healthy demand from end-users amid positive downstream production margins. The styrene production margin was around $150-$170/mt and the monoethylene glycol margin around $120/mt. 

Ethylene spot prices rose $10-$15/mt week on week to $970/mt CFR Northeast Asia and $875/mt CFR Southeast Asia last Friday. A market source said healthy ethylene demand would be covered this week by additional deepsea supplies. 

The propylene market saw a demand pickup last week as well, with the FOB Korea marker rising $10/mt week on week to $855/mt last Friday, the CFR China marker up $16/mt at $875/mt and the CFR Taiwan marker up $50/mt at $900/mt. 

However, the increase in demand may not be sustained into this week as market sources noted that August and September were weak demand season for propylene. 

"End-users do not have enough stocks right now, so they need to buy this week. In the longer term, they still believe China is long on supply so are holding off on large purchases," a trader said. 

Butadiene prices in Asia plunged $50-$55/mt week on week to $910/mt FOB Korea and $960/mt CFR China last Friday amid ample supply from the US and Europe. Market participants said about 3,0000 mt of US-origin butadiene was sold to China and 4,000 mt to South Korea last week, with prices heard in the mid- to high $900s/mt CFR. 

Two tenders were issued by butadiene producers in Southeast Asia, one offering for late July and another for mid-August, with discounts heard as high as $100/mt to the average of CFR Northeast Asian prices. 

METHANOL, MTBE 

Methanol markets were unchanged last week amid stability in China domestic spot prices. 

Buying activity in India was weak due to GST-related disruptions, especially in downstream sectors like formaldehyde, and the monsoon season, one trader said. 

Asian MTBE prices rose $38/mt week on week to $617/mt last Friday, hitting a seven-week high on higher gasoline prices. Demand remained sluggish from China, where participants were largely absent from the market. 

Thin buying interest in the downstream solvents and gasoline blending sectors saw sellers in China's domestic market cutting prices in a bid to spur demand. 

POLYMERS 

Asian high density polyethylene film prices were stable to higher last week as buyers returned to the market to prepare for the traditional manufacturing season. However sources were divided over the near-term outlook, with some expecting prices to fall on fresh supply while others said producers would control output. 

Low density polyethylene and linear low density polyethylene prices continued to rise last week as buying interest returned to the market. Trade sources attributed this to converters needing to stock up ahead of peak manufacturing season in September. 

Polyvinyl chloride prices remained stable week on week amid ongoing discussion for August cargoes. Lukewarm demand was heard to persist in Southeast Asia after the holiday season as regional end-users were heard to be fully stocked. 

In India, market discussion was heard to have slowed as downstream buyers were hesitant to import after the introduction of a new GST. Clarity on the new GST policy should surface in the coming one-two months, sources said.
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