In the Asian petrochemical market this week, the impact of Tropical Storm Harvey has rippled into the acrylonitrile sector. Two major ACN producers -- Ascend Performance Materials and Ineos Nitriles -- had declared force majeure at their Texas plants in end August and early September, causing extreme supply tightness.
This unexpected output disruption in the US rippled into Asia as contract customers looked to source material from the already tight domestic Chinese market. Prices at eastern Chinese ports, including Lianyungang, hit high rates, with discussion levels heard last week at Yuan 14,000-14,200/mt ex-tank which was equivalent to $1,775-$1,800/mt on an import parity basis.
As a result, Asian ACN prices surged to $1,680/mt CFR Far East Asia, the highest in over two-and-a-half years. The last time prices were any higher was on February 3, 2015, when the CFR Far East Asia marker was assessed at $1,700/mt, S&P Global Platts data showed.
Also, the yuan has continued its steady ascent versus the dollar, causing most market participants to continue their wait-and-see stance on the possibility of imports rising. Nevertheless, stable demand from Southeast and South Asia kept the Asian markets busy last week.
AROMATICS
In China, paraxylene could be facing a supply glut due to almost full tanks at locations such as Jiangyin in China, where commercial storage is available.
A source close to Jiangyin-based purified terephthalic acid producer China Prosperity Petrochemical said there had been a "slight restructuring of some PX term contracts for the fourth quarter, which had to do with high PX inventory and a few issues at the neighboring tank farm used for storage," although the impact was negligible on its term supply of PX.
The effect of stored inventory over and above what is normally stored by PTA plants in their tanks for consumption has had a telling effect on the PX-naphtha spread, which has averaged $32/mt lower to date this year than it did over the same period of 2016.
"We've estimated the spread would stand at $320-$330/mt for PX being bought solely for consumption and not being stored in tanks," said a trader earlier. Asian PX fell $11.66/mt week on week to be assessed at $836.67/mt CFR Taiwan/China and $818.67/mt FOB Korea last Friday.
The Asian benzene market was still under pressure from weaker downstream styrene monomer and thin Chinese demand. As deepsea demand from the US Gulf Coast did not rebound despite supply disruption due to Harvey, sellers in Asia could only take direction from the Chinese market.
Import activity in China remained muted due to persistently high domestic inventory levels, while Chinese downstream buyers also had sufficient cargoes on hand. As a result, Asian benzene fell $24/mt week on week to $795/mt CFR China last Friday.
OLEFINS
Asian butadiene prices hit their highest in about five-and-a-half months, on strong demand for October cargoes and tight Asian supply, amid firm Chinese market. In the spot market, FOB basis cargoes dominated trade in the latter part of the week.
Due to the bullish sentiment, Sinopec raised its ex-works butadiene offers in East China to Yuan 12,200/mt, equating to $1,566/mt on an import parity basis, up Yuan 500/mt, or around 4.3%, market sources said.
However, several end-users reckoned domestic supply should increase as Jiangsu Sailboat Petrochemical, also known as Jiangsu Shenghong, is expected to begin commercial sales of butadiene at the end of September.
Butadiene prices are expected to continue rising this week on strong demand for October cargoes.
As for ethylene, the FOB Korea marker shot up $135/mt week on week to hit a 15-month high last Friday as some traders were actively seeking spot cargoes in a bid to cover short positions. Market sources said traders were in a short position as term supply was heard to have been reduced from Europe to Asia.
On the other hand, trading activity on both CFR Northeast Asia and CFR Southeast Asia basis was thin, as end-users opted to take a wait-and-see approach amid falling ethylene derivatives, notably styrene monomer and monoethylene glycol. Sellers were also reluctant to reduce their spot offers amid tight supply and a bullish FOB Korea market.
Market sources expected spot demand would soon increase as the ethylene derivatives market was nearing bottom.
METHANOL AND MTBE
In Southeast Asia, spot methanol prices rose $8/mt week on week last Friday to $369/mt CFR Southeast Asia, driven by extremely tight supply. Methanol supply in the region was expected to tighten in Q4 because of plant turnaround season in the region. Trading activity was sluggish, as spot supply dried up ahead of the turnarounds.
Similarly, the CFR India price jumped $40/mt week on week to $350/mt last Friday. India's methanol market was seen as the strongest in Asia as some buyers were actively seeking cargoes amid limited spot supply from Iran.
Asian MTBE was stable last week as gasoline prices inched up amid a firmer energy complex. It was last assessed at $686/mt FOB Singapore on Friday.
POLYMERS
The most actively traded January 2018 LLDPE futures on the Dalian Commodity Exchange decreased Yuan 285/mt week on week to settle at Yuan 10,030/mt ex-warehouse last Wednesday. Some sources said the market was cooling off last week from the overheated buying activity and artificial high prices brought about by Harvey previously.
A few integrated polyethylene producers were heard selling off their ethylene feedstock, while unintegrated producers were running at lower rates as it was still uneconomical to produce PE from ethylene.
Looking ahead, sources said import prices would remain stable at the same levels, or trend higher, if the firm yuan against the dollar seen at levels since May 2016 continues.
