Poor macroeconomics and oversupply in the near term will weaken the Asian polyethylene market. OLEFINS
Spot demand for ethylene and propylene has risen amid lower production in China as some methanol-to-olefins plants cut operations due to high methanol prices. But some market sources said this was unlikely to continue amid narrowing derivatives margins. As for the Asian butadiene market, prices could come under pressure in January due to rising supply when deepsea cargoes are scheduled to arrive.
POLYMERS
Poor macroeconomics and oversupply in the near term will weaken the Asian polyethylene market. PE prices will come under pressure with PetroChina restarting its 300,000 mt/year HDPE plant in Sichuan last week following an outage on November 20. The company has another 300,000 mt/year HDPE/linear low density polyethylene swing plant at the same site, which is operating as usual.
Chinese PVC prices were stable after December settling $50/mt lower than November. Market focus was shifting to January cargoes, sources said, adding that price were likely to continue to fall, in line with a bearish China domestic market. PVC production is likely to remain high, in line with bullish caustic soda prices.
AROMATICS
Crude volatility will remain one of the key factors in aromatics prices. In the Asian benzene market, front-month demand in Asia continues to be driven by short-term requirement in the US Gulf Coast. USGC prices are likely to remain high due to low inventories and strong prompt demand, which will keep the arbitrage open from Asia to the US. Asian toluene demand is expected to remain weak amid a rise in Chinese supply with the startup of Sinopec Jinling Petrochemicals' 310,000 mt/year plant at the end of November. This is adjacent to its existing 300,000 mt/year toluene plant in Nanjing.
Trading activity in the FOB Korea market likely to be subdued amid 2018 term negotiations that could see some settlements by the end of the month. China's styrene inventory has been below the year-to-date average of 83,300 mt. Market participants expect a sharp surge in spot SM prices ahead of the annual pre-Lunar New Year restocking exercise. However, with around 35,000-40,000 mt of US-origin deepsea cargoes expected to arrive in China between the end of December and January, downstream polystyrene, expanded polystyrene producers remain cautious of buying at current prices, especially given the uncertainty over when demand will return amid the winter lull.
METHANOL/MTBE
Continued supply tightness in the Middle East is likely to push up methanol prices in Asia. Also, operating rates of methanol-to-olefins plants in China have been reduced amid negative margins, which pushed up China domestic methanol prices. Market sources said Asian methanol was likely to remain firm in the near term on persisting supply tightness. Asian MTBE was likely to remain strong in the coming weeks, in line with a strong buying appetite in China. China is currently taking cargoes from Singapore and Malaysia as an arbitrage window is currently open.
SOLVENTS AND INTERMEDIATES
Market participants said the Asian caustic soda market would remain stable for the time being as buying appetite from the alumina sector was likely to continue, while spot supply was tight.
