Here's a quick look at the factors driving petrochemical markets in Asia this week.
AROMATICS
Sentiment in the Asian paraxylene market was strong over the week, with prices reaching a 32-month high on the back of expected tight supply due to upcoming turnarounds. With major South Korean producers like GS Caltex and S-Oil scheduling maintenance of their aromatics plants toward the end of February to early April, the turnarounds account for a loss of approximately 20 cargoes in production.
With strong PX-naphtha margins and stability in the downstream purified terephthalic acid market, traders remained optimistic on the outlook of PX.
Spot benzene traded slightly higher last week, supported by tight supply for March cargoes due to simultaneous turnarounds in Northeast Asia. While crude oil futures had also rebounded last week, FOB Korea price trends were curbed by thin CFR China discussions as end-users were covered for their February requirements, and some were also done for March cargoes. Bids were low but offers were high, tracking the FOB Korea price levels.
In styrene monomer, a rare reverse arbitrage to move product to the US Gulf Coast from South Korea could re-emerge due to production disruptions in the US -- mirroring events of the first quarter of last year.
The surge in SM prices in the US -- which were at a 10-month high Friday -- was attributed to the tight supply from both planned turnarounds and production issues stemming from the unexpected cold weather last week.
OLEFINS
Last week, steam cracker hiccups in Asia dominated the market as bad weather in South Korea forced two steam crackers to shut down. KPIC shut down its sole naphtha-fed steam cracker early Wednesday, followed by SKGC, which shut its No. 2 steam cracker late Wednesday. The two steam crackers have a combined ethylene production capacity of 1.46 million mt/year and propylene at 580,000 mt/year. Both crackers were restarted by Thursday.
Despite the general uptrend in the olefins market due to tight supply amid turnarounds and cracker issues in the region, Asian ethylene was weaker Friday, pressured by sluggish demand in China ahead of the Lunar New Year holidays. With February requirements fulfilled, trading activity was quiet, with a wide bid-offer gap persisting at more than $50/mt.
MTBE
Asian MTBE spot market activity this week will continue to be quiet, given the uncertainty surrounding new tax regulations in China and their impact on the Chinese gasoline complex as well as the upcoming Lunar New Year holidays. The prices, however, will still be supported by firm gasoline, which reached a more than three-year high last week.
POLYMERS
Asian butene-grade linear low density polyethylene, with a melt flow index of 1-2, was assessed up $10/mt week on week Wednesday on the back of higher energy values and snug supply. Several regional producers lowered their PE production in favor of ethylene amid better netbacks.
Sentiment in the Asian PVC market firmed this week due to growing concerns of supply crunch from the US as vinyls production and PVC shipments in the region were disrupted by severe weather. Some market sources in Asia said that FAS Houston prices would likely continue to rise for the same reason in the coming weeks.
