Demand for olefins and other derivatives in the Asian petrochemicals market this week will likely receive a boost this week on plant outages.
The unplanned outage of Europe's biggest refinery, Shell's 404,000 b/d Pernis refinery in the Netherlands has been offline for nearly a week following a fire in its power unit and it is not expected to restart before the second half of August.
Traders said Shell has declared a force majeure on ethylene and propylene -- the building blocks for a wide stream of petrochemicals -- at its Moerdijk steam cracker. The company has not confirmed the force majeure, only saying that it is working to "minimize impact to our customers."
In Northeast Asia, South Korea's GS Caltex shut its No. 2 continuous catalytic reformer at its refinery and petrochemical complex at Yeosu, after a fire broke out at the motor control center transformer on August 2. A Parex unit, which separates paraxylene from mixed xylenes, was also shut, while the toluene disproportionation unit and other toluene-to-PX units were operating as usual.
In eastern China, Taicang port has reopened Saturday after being shut July 31 following the collision of two ships. Both methanol and monoethylene glycol prices rose slightly following the port closure, although the impact was limited.
AROMATICS
Asia's toluene market would likely find support this week from a tightness in toluene supply in South Korea, following the shutdown of GS Caltex's CCR. Some market participants though, said that demand did not rise sharply and that the recent price hike was driven by sentiment.
In the Chinese market, import demand was tepid as domestic prices fell in reaction to a build in inventory levels in eastern China. East China inventories stood at 105,000 mt last week, up 14.13% from the previous week.
PX prices rose last week on the back of firm buying for September and October, as margins for PX producers pegged to CFR Japan naphtha prices strengthened $10.08/mt week on week to $376.125/mt last Friday.
Asian benzene prices jumped $5-$17.50/mt last week, supported mainly by the outage at GS Caltex's CCR and on the back of firmer crude oil futures.
The market structure for the FOB Korea marker flipped into backwardation thanks to strong demand for September cargoes. But the strength was not seen in the structure for the CFR China marker, as domestic inventory levels were still high, at 130,900 mt Friday. Premiums for September discussions were expected to slip amid the supply overhang around the region.
In mixed isomers, India's OMPL issued its first tender seeking mixed xylenes last Tuesday, for a 10,000 mt cargo for delivery over August 16-20 to New Mangalore. A source close to the company said the buying was to cover a shortfall in feedstock supply in August from the neighboring 300,000 b/d Mangalore Refining and Petrochemicals Ltd. refinery.
OLEFINS
Ethylene markets were firmer last week on concerns of tight deepsea availability and few offers. Several traders and producers said the market was watching for the outcome of a sell tender from Petro Rabigh for 9,000 mt of ethylene loading in mid-August, which closed Sunday. The company's last tender for early August was awarded in the mid-$900s/mt FOB, they said, but the cargo is heading west and not to Asia.
Amid the lack of spot offers, traders and producers said spot prices could reach $1,100/mt CFR Northeast Asia and higher, especially if the mid-August parcel also heads to western markets. The likelihood that ethylene volumes could head west was increased after Shell declared a force majeure on supplies of ethylene at its Moerdijk steam cracker in the Netherlands, multiple industry sources said Friday last week.
METHANOL AND MTBE
Chinese domestic MTBE prices have been rapidly rising since July 25, by Yuan 400/mt in both southern and eastern China to Yuan 5,350-5,400/mt and Yuan 5,200-5,300/mt. The recent recovery in MTBE prices could be attributed to increased blending demand coinciding with a steady drawdown of gasoline inventories at state-owned refiners Sinopec and PetroChina, industry sources said.
Methanol prices also rose last week on bullish futures and an improvement in sentiment, amid rising prices in China.
POLYMERS
Polyethylene prices were higher last week as buying interest for virgin material increased due to the strengthening of the yuan against the US dollar. Overall, sentiment was bullish as resin buying activity was ramped up to meet peak manufacturing season in September for Christmas season. This week, prices are expected to remain supported as converters continue procuring cargoes to manufacture goods for the holiday season.
As for polyvinyl chloride, its production from ethylene at Pernis has been impacted by outage at Shell's refinery. Japanese producer Shin-Etsu declared force majeure on K67 PVC grade produced at its plant in Pernis due to a lack of feedstock. A company spokesman said the plant may restart before the end of the weekend.
