Asian market participants will be gathering in Sapporo in Japan later this week for the Asia Petrochemical Industry Conference over Thursday and Friday.
Discussion will focus on sustainability as the petrochemical industry faces key changes in product trade flows, including the inflow of cheaper products derived from North American shale gas, Chinese coal and Middle Eastern ethane.
Meanwhile, ExxonMobil Chemical Company has reached agreement with Singapore's Jurong Aromatics Corporation to acquire its aromatics plant on Jurong Island; it expects to complete the transaction in the second half of 2017.
The acquisition will increase ExxonMobil's Singapore aromatics production to over 3.5 million mt/year; the JAC plant's output includes 800,000 mt/year of paraxylene, 400,000 mt/year of benzene and 200,000 mt/year of orthoxylene.
Singapore is already ExxonMobil's biggest paraxylene production base globally at 1 million mt/year, according to its 2016 annual report.
AROMATICS
Toluene prices are expected to remain weak this week amid an oversupply in the Chinese market following the restart of Sinopec Shanghai's Qingdao Lidong and Huihou Petrochemical plants after planned maintenance than began end March/early April.
Toluene inventories in east China were seen stable week on week at 90,000 mt and in south China up 6.67% at 16,000 mt. Demand for toluene in the gasoline blending pool continued to remain weak, especially after domestic gasoline prices in China were cut by Yuan 250/mt on May 11, sources said.
Asian benzene prices were flat last week amid volatility in crude futures, while an arbitrage window from Asia to the US was beginning to open on paper.
US benzene prices stood at 254 cents/gallon or $759.46/mt Friday and the FOB Korea marker at $720/mt and CFR China marker at $731/mt, while freight costs from Asia to the US were in the range of $40-$45/mt.
Domestic prices in east China were at Yuan 6,100/mt, or $741.35/mt on an import parity basis; a South Korea-China arbitrage could also open once that differential widens beyond $20/mt, according to a market source.
Styrene monomer plunged to a seven-month low at $1,025/mt CFR China last Friday on high inventories and weak demand. The week-on-week decline was only $4/mt as prices retraced losses late week on news that east China's stocks had fallen by 13% from the week before.
Inventory levels were estimated at 124,600 mt last Wednesday, while negotiations were mostly heard for June cargoes.
OLEFINS
Butadiene prices tumbled $175/mt last week under downward pressure from oversupply in China and volatile natural rubber futures. The latter has affected synthetic rubber producers, resulting in lower demand for butadiene feedstock.
Several sell tenders were issued last week and most market participants deemed the concluded prices low. Amid the negative factors, China Petroleum and Chemical Corp., or Sinopec, cut its ex-works butadiene offers in east China to Yuan 10,000/mt last Thursday, or about $1,214/mt on an import parity basis, down Yuan 1,000/mt or 9.1%, market sources said.
On a delivered basis, offers in east China hovered around Yuan 9,200/mt. Further downward pressure is expected as several downstream synthetic rubber producers are mulling cuts in production.
Propylene prices remained largely stable in Asia last week amid holidays in South Korea and Japan. The CFR China price was also unchanged at $808/mt last Thursday from the week before. However, the market is expected to see bearish sentiment this week as polypropylene demand in China remains sluggish. Ethylene prices were largely stable last week but could weaken this week under pressure from rising supply from the Middle East, notably from Iran and Saudi Arabia.
A spot cargo from Iran was heard to have been offered to China while Saudi suppliers were trying to clear high ethylene inventories by increasing term-supply volumes to Southeast Asian customers.
POLYMERS
The near-term outlook for polyethylene is bearish as Chinese demand is weak.
Some converters were heard to be operating at only 30% of capacity and had purchase orders for only three days ahead. Price differentials between domestic and imported cargoes were wide, as Chinese domestic producers have lowered prices.
Actively traded September LLDPE futures on the Dalian Commodity Exchange fell Yuan 130/mt week on week to settle at Yuan 8,735/mt ex-warehouse at last Tuesday's close.
Some upside was seen in Southeast Asia as the forward market structure could be in backwardation due to converters in Malaysia and Indonesia slowing operations during Ramadan, effectively opening the China-Southeast Asia arbitrage window.
Asian polypropylene prices fell $15/mt week on week to $960/mt last Tuesday following a retreat in Chinese domestic prices. The domestic PP marker fell Yuan 200/mt over the same period to Yuan 7,520/mt.
Market sources said expectations of further price falls had dampened prices, even though finished product inventory levels were not high.
METHANOL, MTBE
Methanol prices fell across Asia last week amid expectations of a decline in demand from methanol-to-olefins plants in China. The CFR China marker fell $7/mt week on week to $260/mt last Friday, while domestic China prices edged down Yuan 10/mt to Yuan 2,260/mt. Prices were expected to remain suppressed this week.
As for MTBE, prices remained low on the back of weak buying interest. Although gasoline sentiment appeared to firm up in Asia in the leadup to driving season, the lack of an arbitrage to China has depressed MTBE prices, and this situation was expected to continue this week.
FIBER INTERMEDIATES
Purified terephthalic acid was up $4/mt on a CFR China basis last Friday from the week before, while monoethylene glycol plunged $21/mt over the same period. Demand for both PTA and MEG to produce downstream polyester was heard to be healthy. MEG inventory at east China ports was down 16,000 mt week on week at 611,000 mt.
Market sources attributed the fall in MEG prices to volatile trading, with traders heard to be taking profits on positions as both yuan-denominated swaps and dollar-denominated spot cargoes traded sharply lower, especially last Wednesday, when circuit breakers were almost activated on the Huaxicun Exchange.
The outlook for MEG market was also bearish as market movements were being strongly dictated by futures rather than the fundamentals of demand and supply, according to market sources.
