This week in Asia's petrochemical markets, prices are expected to be stable, underpinned by growing crude oil futures, which touched a five-week high on Monday, on the back of growing calls for a nine-month extension to the OPEC supply-cut deal.
Meanwhile, all eyes will be on fresh market indications from major producers and traders this week, as most market participants were away last week for the Asia Petrochemical Industry Conference in Sapporo.
At the same time, traders attending Chinaplas at Guangzhou in China last week, said that they expect China's "One Belt, One Road", or OBOR, policy to move polymer resin production from eastern China to inland provinces and Asian countries, according to an S&P Global Platts data report.
The OBOR policy is expected to boost polymer demand, which is driven by consumption, given that more than 60 countries in the OBOR route have an estimated combined gross domestic product of $21 trillion, according to sources.
Elsewhere in China, the implementation of consumption tax on imported C9 mixed aromatics has been postponed to July from May, as previously reported. C9 mixed aromatics shares the same HS code as solvent MX, and news of the tax had pushed spot demand for solvent MX to new lows as a result.
AROMATICS
Asian benzene prices jumped $30/mt day on day last week on the back of an overnight spike in US prices as crude rose and a bullish Chinese sentiment emerged from higher downstream styrene markets. Meanwhile, the arbitrage window from Asia to the US had closed as freight costs were at $40-$45/mt and the US was assessed at 277 cents/gallon, or $828.23/mt, last Thursday.
China's Sinopec had raised benzene offers up Yuan 300/mt to Yuan 6,300/mt, or about $757/mt CFR China on an import parity basis.
Toluene inventories in East China had dropped 11.11% week on week to 80,000 mt and in South China it was up 6.25% to 17,000 mt. The dip in inventories had lent support to domestic prices, as it had edged up Yuan 75/mt to Yuan 5,450/mt, or $653.88/mt on an import parity basis last Friday.
Styrene prices have recovered last week after falling to a seven-month low two weeks ago, amid short covering in the market. Industry sources are all eyes on whether or not the rebound could be sustained in the long term as the heavy Northeast Asian turnaround season ends in June.
OLEFINS
The butadiene markets were soft amid oversupply concerns and availability of cargoes from Southeast Asia. Buying interest was thin, especially from synthetic rubber producers, due to poor demand and volatility in natural rubber prices. Several butadiene producers in China completed their planned turnarounds and resumed production.
Propylene prices in Northeast Asia started to moved up, despite a quiet trading market, owing to two upcoming propane dehydrogenation plant turnarounds. But a persistently weak downstream market may have slowed down the rise in prices.
Ethylene prices had plummeted $90/mt week on week amid weak demand to $1,100/mt CFR NEA, although price directions are expected to become clearer this week once the traders are back.
POLYMERS
The actively traded September linear low-density polyethylene futures on the Dalian Commodity Exchange had jumped Yuan 382/mt from last Tuesday to settle at Yuan 9,117/mt ex-warehouse last Wednesday, as sources expected demand to pick up in June and July on peak seasonal demand.
However, the sentiment was generally bearish still on a supply glut. That was because supply-wise, the US would add around 3 million mt/year capacity, Asia around 2 million mt/year, and the Middle East and Europe combined around 1 million mt/year by the end of the year, according to Platts data, with some of that volume bound for Asia.
In Asia, the new capacities would mainly be from China, Iran, and India. Iran plans to start several PE projects, totaling 2.84 million mt/year, in 2017-2018, according to Iranian sources. End-users based in China welcomed Iran's plan, saying that it would increase the number of suppliers to China.
Asian polypropylene prices was flat week on week, as domestic prices continued to attract end-users. The domestic PP marker rose Yuan 130/mt over the same period to Yuan 7,650/mt, equivalent to $894/mt on an import parity basis, while inventories stayed at 850,000 mt.
The notional arbitrage window to the Southeast Asia market was closed, as the FOB China market hit $1,026/mt, with freight rares at $20-$25/mt.
METHANOL, MTBE
Methanol prices were a mixed bag last week, as CFR China inched up $3/mt on bullish crude futures, while other markets in South Korea and Southeast Asia dipped $7/mt on ample supply. Prices were expected to remain stable this week on low demand and ample supply, despite strong crude indications.
Jiangsu Sailboat Petrochemical, also known as Jiangsu Shenghong, will start up its new 180,000 mt/year ethylene oxide plant in July. Its methanol-to-olefin plant will run at full capacity once the downstream EO plant is completed, which will add to methanol demand in the second half of 2017.
The MTBE market was quiet, although gasoline sentiment appeared to firm up in Asia in the leadup to the driving season. The lack of an arbitrage to China has depressed MTBE prices, and this situation is expected to continue this week.
Asian MTBE producers, gasoline blenders and traders largely expect a supply glut in the market for June, amid sluggish demand that could further depress prices.
FIBER INTERMEDIATES
Caprolactam prices in Northeast Asia are expected to fall sharply next week, following a wide gap between CFR China and CFR Taiwan prices. Ample local supply availability in China have led to weaker buying indications for imported cargoes, whereas in the Taiwan market, tighter supply from Japanese suppliers have led to a $300/mt price gap between Chinese and Taiwanese delivered prices. However, the restart of Taiwan's CDPC Toufen plant over the weekend could ease supply shortages.
On the other hand, Asian monoethylene glycol prices soared $94/mt week on week to $772/mt on Friday, amid volatile futures, a week of hectic active trading, and a late-week bullish crude rebound.
Early in the week, traders were heard to be covering short positions, which led to a spike in prices from $708/mt CFR China on Monday to $733/mt CFR China on Tuesday, according to Platts data.
Prices continued to climb over the week as anxious traders had to liquidate their earlier short positions due to expiration of their 90-day letters of credit.
