Sentiment across Asia's petrochemical markets will be a mixed bag this week as price directions were unclear.
Turnaround season for steam crackers in the region could tighten spot supply and push prices up. But limited buying interest, on weaker downstream demand and lower plant operating rates due to China's environmental regulations, was expected to put a lid on price increases.
One of the current news highlights in Southeast Asia, is ExxonMobil's announcement last week that it is in negotiations to purchase Jurong Aromatics' assets in Singapore. Industry participants have their eyes on that news to see if an agreement will be reached soon.
AROMATICS
Toluene prices firmed last week, led by gains in the upstream energy complex. Domestic prices also surged Yuan 210/mt as East China inventory levels fell 4.04% week on week to 95,000 mt. But South China inventory levels surged 66.97% to 10,000 mt last Friday. The uptick seen in prices was not expected to continue this week, as buying interest seems tepid amid ample supply.
For styrene monomer, inventory in East China dropped 9% week on week last Wednesday to 160,000 mt, for trader stocks. Sources are uncertain where the market is headed but the fact is, inventory levels are still relatively high compared to last year and this could continue to weigh on the SM market moving forward.
Asian benzene jumped $32.50-$37/mt or 5% last week, mainly supported by firm sentiment and tighter supply ahead. Asia prices rose earlier in the week, tracking the uptrend in the US Gulf Coast, as the FOB USG marker gained $39/mt week on week. The spot prices, however, slipped later in the week as US Gulf Coast and China prices failed to rise in tandem. While prices could gain some strength this week, any rise would be curtailed by high Chinese domestic inventories, which were at 109,000 mt on Friday, higher than 103,000 mt the prior week.
OLEFINS
The Asian ethylene market rebounded last week, rising $25/mt or 2.2% week on week to $1,165/mt CFR Northeast Asia and inching up $5/mt to $1,040/mt CFR Southeast Asia. Buying appetite was returning to the market as most end-users were covering their short positions for May.
Supply in Northeast Asia were also seen to be tightening in May, in line with the steam cracker turnaround season. But price rises could be limited as spot supplies in Southeast Asia from Thailand, Malaysia and Thailand were heavy.
Ethylene demand in Southeast Asia was also curtailed due to high inventory levels. Looking forward, prices could remain stable as Asian steam cracker operations are currently considering using LPG for steam cracking, according to market sources. It would be the best option for Asian steam cracker operators considering the positive ethylene margin, which was recently at $650-$800/mt -- way higher than the typical breakeven spread of $350/mt.
Using LPG would also help the steam crackers lower their butadiene production yield as butadiene prices have been collapsing since early February on ample supplies.
Butadiene prices plummeted $400/mt or 22.3% week on week to $1,400/mt CFR China and $1,350/mt, hitting a five-month low. China's local butadiene market had also collapsed on lower downstream demand, as prices hit a six-month low of Yuan 11,000/mt. Market sentiment was extremely bearish on oversupply and waning downstream demand.
Propylene prices in Asia rolled downhill on weaker Chinese import demand and faced further pressure on higher propylene and polypropylene inventories this week.
In Southeast Asia, while market sentiment remained bearish, some upside was provided due to re-stocking activity ahead of the holy month of Ramadan over end-May to end-June, which was expected to boost demand over the next few weeks.
POLYMERS
The Asian polyethylene market was weaker last week on thin demand. Although the Asia-US arbitrage was open on paper and Chinese inventories high, logistics and volatility concerns limited the movement of cargoes.
Linear low density polyethylene prices also fell last week with end-users taking a wait-and-see approach, as they expected downstream polyethylene resin to follow declining ethylene prices.
However, some upside is expected from metallocene-based LLDPE due to tighter supply. ExxonMobil, the largest mLLDPE producer in Asia, had shut its 1.9 million mt/year PE unit on Jurong Island late March for planned maintenance.
Looking ahead, Chinese traders are eying moving PE cargoes into Southeast Asia as the arbitrage has now opened between China and Southeast Asia.
Meanwhile, polypropylene prices in Far East Asia remained stagnant at $1,025/mt last week while Chinese domestic prompt prices strengthened slightly, up Yuan 50/mt to Yuan 81,00/mt. Inventory levels remained high at 850,000 mt, hence there would be less motivation for end-users to buy CFR cargoes.
In Southeast Asia, demand was good as South Korea-origin cargoes were heard sold to Vietnam although China-origin exports were winding down.
The China export window to Southeast Asia was effectively closed as the FOB China price was at $1,079/mt, indicating zero margin for Chinese cargo after factoring in freight costs. Markets could be quieter this week as more domestic cargoes are traded versus export cargoes.
METHANOL & MTBE
Asian methanol prices gained $9/mt or 3.1% week on week to $302/mt CFR China last Friday on rising domestic prices. The price gains were also partly driven by higher crude prices, due to fears of crude flow disruptions following the US missile attacks in Syria. Prices could continue rising this week on these motivators. In India, inventory was estimated at 80,000-100,000 mt, above the average monthly inventory while demand remained subdued.
The Asian MTBE market was up $46/mt or 7.4% week on week to $667/mt FOB Singapore Friday on stronger gasoline prices. Buying interest could be tepid this week, following Chinese domestic price cuts in gasoline by Yuan 230/mt on March 29.
