Here's a quick look at the factors driving petrochemical markets in Asia this week.
AROMATICS
A rebound in the domestic East China market and firmer US Gulf Coast prices are likely to continue driving an uptrend in the Asian benzene market this week. All eyes will be on term negotiations for import cargoes to Chinese end-users as they wrap up discussions for domestic volumes and finalize their requirements for imports.
Spot supply in the FOB Korea toluene market is expected to remain tight this week on the back of improved benzene/toluene and paraxylene/toluene spreads, which ended last Friday above $170 and $200/mt respectively, as South Korean producers channelled their toluene into toluene disproportionation plants amid improving margins. However, with China facing a domestic supply glut, tight supply of South Korean toluene is unlikely to support prices in Asia this week.
OLEFINS
The conclusion of term contracts will be the focus of the Asian olefin market this week. January discussions for ethylene are due to start this week amid expectations of firming demand, especially in Northeast Asia. Long-term contract negotiations for 2018 have not yet been finalized, increasing spot buying requirements from end-users. Despite this, the CFR Northeast Asia ethylene marker was assessed unchanged week on week at $1,310/mt last Friday.
Term discussions for butadiene are currently underway, with indications that at least one Asian producer has awarded a term contract at a $30-$40/mt discount to CFR Northeast Asia prices, equivalent to prices on an FOB basis for butadiene. Butadiene spot cargoes arriving late January from Europe and the US are also being scooped up. Producers expect the trend to continue, especially from Chinese end-users ahead of Lunar New Year holidays in mid-February.
Downstream, synthetic rubber users are expecting proposed cuts in natural rubber exports by Thailand, Indonesia and Malaysia to provide support to SBR prices this week.
In the propylene market, activity was stable last week amid contract discussions for 2018, which are expected to conclude this week. Spot bids and offers for January are expected to emerge once the result is known. The first half of 2018 is expected to be bullish due to seasonal turnarounds, and propylene prices are seen set to rise steadily throughout the period.
METHANOL, MTBE
A global shortage of methanol is expected to continue to buoy prices across Asia this week, and to increase activity after several quiet weeks. Only one of three methanol plants in Southeast Asia is reported to be operating at present, and non-Iranian Middle East supply has also been constrained.
Methanol rose $14/mt week on week to be assessed at $395/mt CFR China last Friday as the few offers seen were raised to $400/mt and above, while the China domestic price rose Yuan 200/mt to Yuan 3,450/mt over the same period, equating to $412/mt on an import parity basis.
Strong gasoline will likely continue to provide firm support to MTBE prices this week for gasoline blending as more market participants issue gasoline tenders among tightening supply.
POLYMERS
Asian high density polyethylene prices were mostly lower last week as buying interest faded. There is typically little discussion mid-month, with most buy-sell negotiations concluded at the end of a month or the start of the next, market observers said.
HDPE supply continued to be tight, particularly from Iran, and prices remained close to year-to-date highs despite edging lower last week for most grades, China buyers said.
