Sentiment in the Asian petrochemical market was expected to be stable this week, calming down after an unplanned outage at Shell's 404,000 b/d Pernis refinery in the Netherlands hit the ethylene market last week. Four units at the refinery are currently in the start-up phase.
Last Thursday, Shell had said that it aimed to restart most of the facility's units before the end of August.
In Northeast Asia, South Korea's second-largest oil refinery owned by GS Caltex shut a heavy oil upgrading unit last Thursday after a fire broke out in the vacuum residue hydrocracker, or VRHCR, at its complex in Yeosu.
Market sources said that as of now, the impact of the shutdown has not really flowed down to petrochemicals and its effects remain to be seen.
AROMATICS
Trading activity in the Asian toluene market was subdued due to tepid buying interest. The situation was further exacerbated by sufficient domestic supply in East China and South Korea. South Korean stocks jumped 18.75% week on week to 9,500 mt.
The market outlook is bearish as domestic Chinese supply is expected to rise in the coming months. According to Chinese end-users, domestic trading was taking place at prices much lower than the offers of imported cargoes and hence, there was no incentive to procure imported toluene.
Asian benzene prices were generally on an uptrend last week, underpinned by firmer fundamentals and expectations of tighter supply on the back of plant troubles in South Korea.
Traders out to cover their short positions before declaration had buoyed FOB Korea prices over the week, in line with downstream styrene monomer prices. However, after the declaration, demand in the FOB Korea market shifted to October as Chinese import demand was not likely to rebound in October, flipping the market structure from backwardation to a contango. Premiums for September discussions were expected to slip amid the supply overhang around the region.
PX prices were stable last week. Spot offers for September fell amid volatile purified terephthalic acid futures in China. Looking ahead, demand is expected to be weaker as planned downstream derivative plant turnarounds for the third quarter has begun -- for example, at Hengli Petrochemical's 2.2 million mt/year No. 2 PTA line at Dalian for 12-15 days.
OLEFINS
Ethylene markets gained strength last week, driven by limited spot supply. The CFR Northeast ethylene price marker spiked $85/mt day on day last Friday to hit a three-month high, while the CFR Southeast Asia market jumped $55/mt and scored a five-month high of $1,075/mt during the same period.
According to sources, deepsea supplies from the Middle East were finding homes in Europe instead of making their way to Asia. Also, the buying appetite for spot ethylene cargoes in Asia was healthy, with derivatives margins earlier in the week all in positive territory.
Several traders and producers said the market was waiting for the outcome of a sell tender from Thailand's PTT for a 3,500-5,000-mt spot cargo for late August loading.
Asian butadiene prices rebounded by $140/mt to $1,100/mt CFR China, amid tight supply and an uptick in demand. Spot availability was limited as most of the deepsea cargoes had been sold and end-users turned their attention to prompt cargoes which buoyed prices up.
Robust downstream demand from the styrene-butadiene rubber market also provided support, as Fushun Petrochemical increased its ex-works offers for 1502 SBR to Yuan 12,000/mt last Wednesday, up Yuan 300/mt day on day.
METHANOL AND MTBE
Asian MTBE prices retreated $9/mt on Friday to $652/mt FOB Singapore after hitting an 11-week high on Thursday, as crude and gasoline prices fell amid a weaker energy complex.
Methanol prices were stable last week although Chinese domestic prices had edged up Yuan 20/mt over the same period to Yuan 2,480/mt or $292/mt on an import parity basis. According to sources, prices were mostly driven by a sentiment rally in Chinese commodities and were not supported by firm market fundamentals.
POLYMERS
Buying interest for the virgin material had increased due to the strengthening of the yuan against the US dollar.
Procuring of new cargoes was mainly limited to just-in-time coverage, amid cautiousness over holding buffer stocks. However, market participants were expecting buying sentiment to improve over the next few weeks as China was on the cusp of the peak manufacturing season.
