Asian petrochemical markets are expected to be weighed down by potential upcoming capacities in China and a persistent slowdown in downstream demand. No apparent year-end up uptick in seasonal demand were observed in several Asian markets, offering little support for prices going forward.
AROMATICS
Volatility in the Asian paraxylene (PX) market is expected to persist on concerns of a new PX capacity coming online gradually as scheduled, contrary to earlier expectations of delays.
While PX may track firmer upstream naphtha and isomer-grade mixed xylene on the narrow spreads so far in Q4, slow downstream demand continued to hamper sentiments and support to PX prices are unsustainable on the weak fundamentals.
According to S&P Global Platts data, the spread between PX and naphtha has hit a 5.5-year low of $250.13/mt Friday. Average November PX-naphtha spread is calculated at $262.82/mt, as compared to an average of $279.60/mt in October. A market source said that narrow spreads, weak margins and contango market structure can be expected once the new capacity comes online, in view of weak downstream demand. This week, all eyes will be on Rongsheng's upcoming PX capacity at its integrated complex in Zhoushan Island, given that Zhejiang Petrochemical has planned to test-run its aromatics unit this weekend.
Isomer-MX prices, meanwhile, are likely to find support from a tightly supplied Chinese market, with East China inventory level well below 20,000 mt as of end of last week. Demand from new PX plants in China are keeping inventories low, but has resulted in poor margins for PX. This subsequently led China and South Korea PX facilities to lower production rates recently.
OLEFINS
Supply glut in Asia is expected to exacerbate this week after three propylene facilities restarted in the previous week, raising expectations of increased availability of cargoes and further downward price on propylene values.
South Korea's Lotte Chemical restarted its steam cracker with nameplate propylene capacity of 500,000 mt/year at Daesan on November 11 after a 28 day maintenance while China's Tianjin Bohai Chemical's 600,000 mt/year propane dehydrogenation plant (PDH) and Oriental Energy's 660,000 mt/year PDH also resumed production after turnarounds in the previous week.
Southeast Asian methanol prices are expected to firm this week if Petronas Chemical extends the shutdown of its 1.7 million mt/year No.2 methanol plant in Labuan. The plant went down on November 2 due to a power dip and was slated to restart early this week. Spot enquiries spiked last week for December-arrival cargoes. In China, market participants await clearer market direction after methanol futures slumped to a three-year low last week, on expectations that cargoes from new Iranian producer, Bushehr Petrochemical, could start shipping to China in December. While domestic ex-tank prices rebounded slightly last Friday, CFR China methanol prices are near production costs and the direction of the futures market will set the tone for this week.
