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Asia petrochemicals wreathed in uncertainties; sentiment downbeat | ICIS


SINGAPORE (ICIS)–Asia’s petrochemical markets
are wreathed in uncertainties as sentiment is
hit by severe power outages in China, economic
concerns and shrinking auto production.

Reflecting soft demand, China’s
restocking activities
prior to its National
Day holiday (1-7 October) are limited, with
factory operations curtailed as provinces
attempt to keep energy consumption within
annual limits prescribed by Beijing under the
dual-control policy designed for environmental
protection.

Meanwhile, vessel delays in China caused by a
myriad of issues – congestion, a shortage of
pilots and strict quarantine measures – also
pose a challenge.

Unlike before, the average waiting time to load
and unload at Chinese ports is around one to
two weeks at present.

China requires foreign vessels to have
specialized pilots on board before entering
internal waters along the Yangtze River.

The intra-northeast Asian market continues to
see prompt cargoes struggle to find deployment
as most owners are still reluctant to call at
Chinese ports.

Also, with global vehicle production
on the decline
amid severe shortage of
semiconductor chips, a major pillar of demand
for petrochemicals is threatened.

Petrochemical-based materials account for more
than a third of the raw material costs of an
average vehicle.

Polypropylene (PP) has a 35% share of the key
polymers used in cars, followed by polyurethane
(19%), polyamides (11%) and acrylonitrile
butadiene styrene (ABS)/styrene acrylonitrile
(SAN) resins.

DOWNBEAT ECONOMY
On a macrolevel, some investment banks have
shaved their
GDP growth forecast
for China to below 8%,
as industries struggle from power shortage
stemming from high coal prices, and as the
dual-control energy policy plays out.

Evergrande, China’s second-bigger property
developer, is a bane to the Chinese economy,
having chalked up $305bn in debt, or equivalent
to 2% of China’s GDP.

This crisis could threaten the stability of the
Chinese property market, as well as the
financial system.

A weakening economy in Vietnam also does not
bode well for the petrochemical markets in
Asia.


The southeast Asian economy
contracted by
6.17% year on year in Q3, the largest quarterly
slump on record as COVID-19 restrictions
continue to weigh on its industrial and
services sectors.

PETROCHEMICAL STRUGGLES
The petrochemical markets in Asia certainly do
not have it easy.

In the ABS market, momentum is slow across the
region as players grapple with reduced output,
as well as lower derivative production in China
amid the energy curbs.

In the paraxylene (PX) market, uncertainties
prevail amid persistent margin squeeze in
downstream purified terephthalic acid (PTA) and
polyester markets, coupled with rising freight
costs.

There are expectations that PTA and polyester
production in China would decline in the near
term in view of the energy controls.

PTA production margins are also being
compressed by rising cost of another feedstock
– acetic acid. Several plants in China have
shut, leading to weaker prompt PX demand.

PX supply, on the other hand, may increase amid
expectations that Zhejiang Petrochemical will
raise operating rates at its aromatics facility
from November onward.

Higher production will hinge on the company’s
ability to secure additional feedstock crude
quota going forward, which remains uncertain.

For monoethylene glycol (MEG), supply in China
fell as production, especially from coal-based
units, was cut amid current energy
restrictions.

Buying sentiment downstream was dampened as
polyester plants, dyeing and weaving factories
in east China also had to adjust down their
operation to reduce emissions.

In the methyl methacrylate (MMA) market, China
is facing curtailed domestic output with some
plants starting maintenance due to the energy
controls.

Some downstream operations, including at
polymethyl methacrylate (PMMA) plants in
Jiangsu province, were also affected by the
same policy.

Chinese MMA export availability is currently
limited, with trades hindered by port
congestion.

In southeast Asia, demand remained subdued,
although there was some pick-up in October
contractual offtakes, as COVID-19 restrictions
are being lifted.

Focus article by Felicia Loo

Additional reporting by Angeline Soh,
Samuel Wong, Judith Wang, Li Li Chng and Luffy
Wu

Thumbnail photo: At Yangpu international
container port in south China’s Hainan Province
on 26 May 2021. (Source:
Xinhua/Shutterstock)



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