ASIA – The week ahead in petrochemicals

Singapore —
Sentiment in the polyester chain continues to be driven by strong demand from the downstream Chinese textile sector, but fundamentals in paraxylene and purified terephthalic acid have yet to see much improvement amid high stockpiles.

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Meanwhile, Asian ethylene spot market sentiment is expected to be bearish due to the recovery of global supply and Asian recycled polyethylene terephthalate market continues to grapple with weak demand.


Potential downside risks in Asian paraxylene prices loom in the week starting Oct. 26, despite recent strength and positive Chinese GDP data, as downstream PTA inventory in China stood at around 4 million mt, making a rise in PX prices uncertain. Asian paraxylene inched lower by $4.34/mt on the day to $551.33/mt CFR Taiwan/China and $533.33/mt FOB Korea Oct. 23, tracking falls in downstream PTA futures.


The outlook for benzene remains mixed with supply from aromatics producers tightening as they run at lower rates due to narrow margins. Plants with obligations have been heard to run at just enough to cover contracted volumes, leaving minimal volumes to be sold on a spot basis. However, spot supply from integrated refineries has increased, while minimizing the volume of feedstock channeled toward gasoline blending for use as an octane booster. Demand, however, is expected to find support from the styrene chain with styrene producers running at high rates at polystyrene plants.


The isomer-MX market is likely to remain relatively rangebound, locked between naphtha and paraxylene prices. As PX recently has seen more support from downstream markets, the PX-MX spread in the week ended Oct. 24 hovered above $100/mt. This made it more inviting to producers of PX, but it was uncertain whether the level can be sustained for a longer period of time.

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Signs of limited demand in the Asian toluene market are partly expected to wear off, casting further downward pressure in the week starting Oct. 26, despite mild supply tightness. The FOB Korea dipped under the key $400/mt mark to settle at $397/mt in the week ended Oct. 23, after staging a short-lived recovery. Participants, however, may now eye potential emergence of bargain hunting opportunities for the last quarter of 2020.


Asian ethylene spot market sentiment is expected to be bearish due to the recovery of global supply, and selling interests were seen in Europe, South and North America and the Middle East. Demand is likely to remain sluggish as buyers plan to keep inventory at a low level ash they approach the year-end.


Chinese PTA prices have started showing signs of weakness since Oct. 22 due to high PTA stocks and new startups. The downstream polyester sales have also slowed since then, after textile sector bought large quantity of polyester products post the Chinese Golden Week. In India, buying interest is expected remain active for imported PTA cargoes amid tight domestic supply. Freight cost from Northeast Asia to India has surged due to limited container availability.


Northeast Asian PP prices are likely to stay rangebound in the week starting Oct. 26, as producers continue to be firm on offers amid limited spot availability, while customers have shown some signs of resistance for any further price increment due to uncertain demand and new startups. Meanwhile, South Asian buying appetites seem strong amid limited supply and healthy demand. In Southeast Asia, PP buyers continue to adopt a wait-and-see approach, though some customers were heard starting to accept higher prices.

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Asian recycled PET market continues seeking direction amid high feedstock bales prices and weak demand, especially for exports. A number of Asian R-PET producers were heard struggling with weak demand, except in South India, where customers are actively inquiring both local and imported cargoes. Competitive virgin PET prices will continue weighing on the recycled market toward the end of the year.


The China CFR propylene market could see some upside in the week starting Oct. 26 even as Chinese buyers pare back spot purchases. South Korea’s Lotte Chemical is planning to postpone the restart of its fire-hit, naphtha-fed steam cracker in Daesan from end-November to early December, and this is likely to limit the availability of spot propylene cargoes to China and will lend support for the feedstock market for rest of Q4.


Acrylonitrile prices in Far East Asia are poised to receive firm support as major plants have embarked on time for their turnaround in Q4. A major producer in Taiwan, CPDC, shut its 240,000 mt/year acrylonitrile plant in Kaohsiung on Oct. 20 for a month of planned turnaround, followed by Chinese producer Secco’s plans for a turnaround on Nov. 17.


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