Asian petrochemical markets were mixed last week as most aromatics products softened along with upstream energy markets while olefins remained supported by supply tightness amid steam cracker turnaround season. Nonetheless, concerns over narrowing margins in the downstream olefins segments are likely to cap further upticks this week.
AROMATICS
Asian paraxylene prices had fallen amid a weaker crude futures market and a falling purified terephthalic acid market. Buying sentiment will continue to be pressured this week if both upstream and downstream futures remain weak.
In upstream isomer-MX and related solvent-MX markets, sentiment is seen remaining bearish this week as inventories rise in China and demand slows due to the partial introduction of new tax rules affecting gasoline blendstocks and oil products. The new tax regime imposes tariffs on previously untaxed mixed aromatics and mixed xylenes if they are used in the gasoline blending pool, and this has dented demand from China's gasoline blending sector.
High domestic inventory levels in China are also expected to continue weighing on both domestic and imported benzene prices this week, with several Chinese downstream plants undergoing scheduled maintenance in March and new plants running at low operating rates.
OLEFINS
In propylene, tight supplies due to plant turnarounds have been offset by continuous weak demand in China from the downstream polypropylene sector amid high PP inventories. These high inventories will likely continue to put a cap on demand this week.
Meanwhile, ethylene jumped $70/mt week on week to a one-month high last week, driven by tight supplies amid ongoing steam cracker turnaround season. Further uptrend this week however, may be limited as current prices are seen pressuring narrowing downstream margins in styrene monomer and monoethylene glycol.
MEG margins have already turned negative last week from a combination of weak demand and soaring feedstock ethylene prices. The MEG margin had plunged over the week, falling to around minus $41/mt last Friday, from $101/mt the week prior.
Poor downstream demand and high inventory levels have pressured down the Asian MEG market last week, and trade participants expect the situation to persist this week. Chinese polyester plants typically undergo maintenance over the Lunar New Year and restart in March, but the pickup in polyester plant operating rates had been slower than expected.
Meanwhile, domestic inventories in east China last week had hit a near two-year high of 707,000 mt last Friday, as cargoes had been delayed around the Lunar New Year period, resulting in a concentration of arrivals last week, pushing up stocks.
Butadiene markets were firm last week, amid concerns over tight supply resulting from Indonesian Chandra Asri's 100,000 mt/year plant shutdown and steam cracker shutdowns in Northeast Asia as well. This week, the market may be pressured by muted spot demand as several end-users said they were mostly covered for March and April requirements. Downstream synthetic rubber producers also said there was a reluctance by tire producers to accept higher prices, citing volatile natural rubber futures and tight carbon black supply.
MTBE
Asian MTBE surged last week, driven by firm buying interest as supply in the region was tight following a turnaround at a major Middle Eastern plant. A delay in the imposition of some portion of new Chinese tax rules affecting gasoline blendstocks to May 1, from March 1, also spurred some demand in China which absorbed the usual length seen in Asia. The market is seen as remaining supported this week from healthy buying interest.
