Asia's petrochemical markets were mixed last week, although trade activities of solvent-grade mixed xylene came to a near standstill amid widespread expectations of China imposing a consumption tax on imported mixed aromatics, as the product shares the same code for imports as mixed aromatics.
The consumption tax -- if levied -- is likely to see Chinese gasoline blenders shift from using mixed aromatics to alternative blendstocks such as isomer-grade mixed xylene and possibly MTBE.
Chinese importers have already stepped up isomer-MX buying ahead of the expected tax, as Chinese gasoline blenders are currently using a lower grade of isomer-MX as blendstock, according to market sources. Adding to this, greenfield Yunnan Petrochemical is expected to start commercial operations in May, adding 200,000 mt/year of new toluene capacity, which will keep domestic toluene supply sufficient for now.
AROMATICS
Benzene prices fell last week amid weak demand on a closed arbitrage window to the US Gulf Coast, as well as weaker downstream styrene monomer, and may continue the downtrend this week.
Paraxylene prices were largely stable over the week where India's Reliance Industries Ltd. announced the commissioning of the second phase of its No. 2 PX plant at Jamnagar.
Market participants have been closely following news of the plant's operations in anticipation of more PX heading to China this year from India.
The company will export its first term PX cargo from the second phase of the PX plant to China at the end of April aboard the MT Bunga Angelica, with 15,000 mt of the 35,000 mt PX shipment destined for Dalian, industry sources said earlier.
For the week ending April 28, the market will be caught up in the monthly Asian Contract Price negotiations. A couple of market sources have already indicated that the chances of a major settlement are high, with much the same market conditions as the previous month, which resulted in a major settlement for April at $835/mt CFR.
Isomer-grade MX and solvent-grade MX prices fell last week, with the market still awaiting further clarity on whether China will impose any consumption tax on mixed aromatics as this may have an impact on alternative gasoline blendstocks such as mixed xylene.
Although there has been no official confirmation, market participants expect details to be released some time between May 1 and July 1, S&P Global Platts reported previously.
OLEFINS
The Asian ethylene market rose $10-$35/mt last week, as some spot demand continued to emerge amid supply shortfall from lower methanol-to-olefins plant operations in China as well as steam cracker turnarounds in Asia.
Ethylene prices are expected to continue their uptrend this week as supply fundamentals would remain unchanged. But upside would likely be limited by narrowing margins for most ethylene derivatives.
Butadiene prices fell last week, although the fall was stemmed by signs of the market bottoming out. A cargo of Thai origin for May loading was sold to a new trader in the Asian butadiene market and subsequently bound for China, according to market sources.
Also, a rare cargo of 3,000 mt was sold for prompt loading from Northeast Asia to Europe. In northern China, Fushun Petrochemical's offers stood last Friday at Yuan 10,500/mt delivered, or about $1,278/mt on an import parity basis, up from Yuan 9,800/mt the week before.
Several producers were optimistic that the market has stabilized but cautioned that downstream derivatives such as styrene-butadiene-rubber and acrylonitrile-butadiene-styrene were weak. Sellers are optimistic that some buying interest would be seen this week.
Propylene spot prices declined $11-$30/mt last week, with high inventories of downstream polypropylene and slower sales in China cited as main reasons behind the slowdown in demand.
Taiwan's CPC Corp. and Formosa Petrochemical Corp. are expected to restart their residue fluid catalytic crackers this week. Southeast Asia demand was also lackluster, with no pick-up in demand ahead of the Ramadan month. Moving forward, the market is likely to continue seeing relatively slow demand, as trade sources expect inventories to be slowly drawn.
POLYMERS
This week in Asia's polyethylene market, all eyes are on major producers' offers as this would indicate price movements for May, market participants said.
While demand is expected to remain at healthy levels, rising domestic production and expectations of more deepsea cargoes arriving at China's ports this week is expected to continue to suppress prices this week.
Southeast Asian demand was stable, but supply was ample, which kept prices relatively steady.
Linear low density polyethylene prices dipped in South Asia last week as end-users adopted a wait-and-see approach on upcoming offers, but prices could stabilize this week as India sought to procure more cargoes before the monsoon season.
A growing focus on metallocene-based LLDPE has led to more plants coming up in Southeast Asia as specialty grades are the key to sustainability in the increasingly oversupplied PE market in China.
Asian PP prices moved in different directions this week. The Chinese PP market was notable weaker, as the domestic PP marker hit a seven-month low of Yuan 7,700/mt Wednesday. Market sources pointed to higher PP inventories and low product sales as main reasons for lower prices.
PP inventory levels are expected to remain high in the coming week, as traders believed that more time would be needed for the supply to be drawn down.
METHANOL, MTBE
Methanol prices into India fell $38/mt, or 12.8%, over the week to $260/mt CFR India last Friday. The market is likely to remain weak amid ample supply from the Middle East, according to trade sources.
The FOB Singapore MTBE marker fell by $22/mt over the week to be assessed at $676/mt Friday. Market demand was slower on lower imports from the region's key buyer China, according to sources. The regional MTBE market is expected to remain bearish this week, with the end of ongoing turnarounds.
OTHERS
The Asian monoethylene glycol market slumped $45/mt over the week to $690/mt CFR China Friday, with traders saying there was talk of short-selling. Domestic MEG prices in China followed suit, falling Yuan 390/mt ($57/mt) over the same period to Yuan 5,780/mt, equivalent to $680.40/mt on an import parity basis.
One factor that could explain the downtrend in MEG prices was the 629,000 mt of inventory at Chinese ports -- a level considered very high. Bearish sentiment coupled with market volatility on cash flow issues faced by downstream polyester producers were other factors cited by market participants.
As a result, margins last week hit minus $183/mt, the lowest since October and after being negative since February 14, Platts data showed. Market volatility has left most market participants bewildered at current price movements, as the outlook for MEG remains murky this week.
