Asian petrochemical market sentiment remains bearish this week after prices last week broadly tracked the downtrend in crude.
Market participants will be closely monitoring developments in the Middle East after four countries in the region cut ties with Qatar Monday over its alleged support for terrorist activities.
In Northeast Asia, Linyi Jinyu Petrochemical's complex in east China's Shandong Province was shut early Monday after a liquefied gas tanker exploded around 1 am, triggering a fire in a loading area.
The extent of the damage could not be confirmed at time of publication, but the shutdown was not expected to affect spot supplies amid a supply glut.
In South Asia, market participants are awaiting the release of reports next week to assess the impact of India's plans for a goods and services tax on their industry segments.
Most are taking a wait-and-see approach on trading positions in the meantime, with the tax slated to be rolled out on July 1. According to market talk, the tax on petrochemicals and its derivatives is likely to be 18%.
AROMATICS
Asian styrene monomer fell $2.50/mt last week on the back of falling crude futures and the restart of several SM plants in east China after turnarounds. Conversely, China's domestic SM prices were up 10.28% last Friday from May 9 at Yuan 9,120/mt, with market participants now expecting prices to stabilize around the Yuan 9,000/mt mark until at least mid-June.
With the recent restart of Abel Chemical's SM production and the expected restart of Tianjin Dagu's 500,000 mt/year SM plant, China's domestic SM price should stabilize in June as supply tightness eases, market sources said. In addition, Sinopec Jiujiang's new 80,000 mt/year SM plant in Jiangxi has started production, shipping its first cargo last week.
SM inventory levels in east China had been falling steadily since the start of April, and shrank 48% week on week to 91,900 mt May 26, before stabilizing to edge up 1.52% last week to 93,300 mt amid a lack of deepsea cargo arrivals in the region from the US Gulf.
In solvents, a healthy price spread between isomer-grade mixed xylene and naphtha and a narrowing spread between isomer-MX and downstream paraxylene had some isomer-MX market participants Monday expecting the spreads to revert to more typical levels in the near future.
This means the MX-naphtha spread to shrink and PX-MX spread to widen, a Northeast Asian producer said Monday. The spread between isomer-MX on an FOB Korea basis and naphtha on a CFR Japan basis was $213.63/mt last Friday, compared with a year-to-date low of $141.50/mt on January 13. The spread between isomer-MX FOB Korea and PX on a CFR Taiwan/China basis stood at $148.33/mt, compared with a year-to-date low of $140.50/mt on April 26.
OLEFINS
Butadiene prices hit a 12-15 month low last Friday on oversupply concerns for both butadiene and synthetic rubber. The CFR China and FOB Korea markers stood at $955/mt and $905/mt respectively, both down $60/mt week on week.
Both natural and synthetic rubber stocks at warehouses in Qingdao in China remain high. Natural rubber stocks were estimated at 215,900 mt June 1, up 4.4% from May 15, and synthetic rubber stocks at 5,800 mt, down 1.6% over the same period. This is expected to weigh on prices this week.
In propylene, Northeast Asia prices inched down $2-$3/mt week on week to $858/mt FOB Korea and $907/mt CFR China Friday on the back of high inventories. Market sources said downstream sales were slow, causing prices to fall.
Persistent spot supply from the Middle East and Southeast Asia applied strong downward pressure on prices last week, causing Asia's ethylene market to plunge $55-$64/mt week on week. Market sources said the ethylene market would likely remain weak as regional supply was seen as more than sufficient, and steam cracker turnaround season was coming to an end.
POLYMERS
Trade flows are set to change with new PE derivatives production hubs coming on stream in Indo-China and inland China as the labor force in east China becomes more expensive. The ASEAN free trade agreement means ASEAN producers would prefer to focus on regional sales in which both producers and end-users have duty advantage benefits.
India was expected to export PE on a regular basis this year as the country becomes self-sufficient for the first time with new plant startups. Landlocked countries along the One Belt, One Road route will contribute to polymer demand going forward, as consumption is expected to grow on the burgeoning population growth estimated in the next 5-10 years. The more than 60 countries along the OBOR route have a combined gross domestic product of about $21 trillion, according to estimates.
Asian polypropylene prices fell $10/mt last week following a fall in China futures. The domestic PP marker fell Yuan 150/mt over the same period to Yuan 7,800/mt, equating to $912/mt on an import parity basis. The arbitrage window to Southeast Asia was closed, as the FOB China market hit $1,045/mt, with freight costs at $20-$25/mt. METHANOL, MTBE
Methanol prices were mostly lower last week, while China's domestic price slid Yuan 70/mt to Yuan 2,280/mt, equating to $262/mt on an import parity basis.
The CFR China marker fell $4/mt, while the CFR Southeast Asia marker fell $5/mt on ample supply and weak demand.
Prices were expected to remain stable this week on lackluster demand amid ample supply.
MTBE prices fell $18/mt last week amid lower gasoline values and falling crude futures. Buying interest for MTBE was thin as key buyers such as China reduced imports amid sufficient domestic inventory.
