Asia Petrochemicals Outlook, W/C Apr 22.

Petrotahlil:

Asian petrochemicals would likely remain weak this week due to thin China demand.

AROMATICS

Asian paraxylene market is seen to be oversupplied for June due to the impending commercialization of PX cargoes from Hengli Dalian. Last Thursday, Asian PX dropped by $102.33/mt, the lowest level since January 3, according to S&P Global Platts data.

Asian benzene demand would likely remain bearish, especially in China amid lower domestic prices. Traders would continue seeking an arbitrage opportunity to move South Korea-origin cargoes to the US despite the South Korea-US arbitrage window is seen to be closed on paper amid negative FOB Korea-CFR China price spread.

Asian styrene monomer slipped $10/mt on the week to $1,061/mt CFR China Thursday amid softer sentiment and an unclear market direction. Current market situation has also led to less buying interest in the downstream polystyrene market as buyers prefer to wait for the time being.

FOB Korea isomer-MX was assessed at $726/mt on Thursday, up $3/mt compared to April 12, so far showing resilience against the fall in downstream paraxylene prices last week. A trader noted that isomer-MX was supported by gasoline blending demand and could see a price increase in the China market going forward this week.

FOB Singapore MTBE fell $20/mt week on week to $758/mt last Thursday, as bullish 92 RON cracks lost its steam slightly from the eight-month high level hit last week. But, market sentiment remained supported amid hovering concerns on tight crude oil supply hit by OPEC-led output cut and Iranian and Venezuela sanctions.

Sentiment in the Chinese methanol remains bearish with a number of cargoes from Iran expected to arrive in May, while Southeast Asia is stable to firm in the first half of May due to shortage of the product. However, tightness in Southeast Asia and India is expected to ease from May 15 with the arrival of Middle East cargoes.

OLEFINS

Asian ethylene market sentiment would likely remain bearish this week, after marking a $30-$35/mt week on week drop Thursday, hit by diminishing demand amid negative margins for downstream monoethylene glycol. Negative margins may slash downstream plant operations, which would likely prompt excess ethylene supplies in the market.

The propylene market in Asia remained stable last week as the Chinese buyers were hesitant about spot procurement given lackluster demand for downstream polypropylene and growing supply. Industry sources were expecting the price to slip further as Yantai Wanhua, the largest PDH operator is coming back onstream this week after a three-week turnaround.

Asia butadiene prices continued to slip $15/mt on week amid strong liquidity in the market and heavy supplies. However, there is an expectation that prices could strengthen ahead as styrene butadiene rubber margins widen amid stable sales prices and softer raw material prices.

Supply glut is expected to continue weighing on Asian MEG market this week, with record high inventories of about 1.43 million mt at the main ports of eastern China. The CFR China MEG price was assessed at $594/mt last Thursday, down from April 12 for 15-30 days forward cargoes.

POLYMERS

Asian polypropylene prices were assessed higher last week amid firmer demand and tighter supply. The outlook for H2 2019 was mixed amid a cost push from expected higher naphtha prices and healthy PP demand. Meanwhile, Asian linear low density polyethylene market would likely remain stable or weaker this week. Last Wednesday, LLDPE market managed to remain stable despite falling futures on the Dalian Commodity Exchange.

Asian PVC may rebound this week after spot prices dropped by $10-$30/mt week on week Wednesday to hit the lowest since June 2016. Market sources said Asian PVC is seen to have hit its bottom after a major PVC maker reduced its fresh offer for May by $30-$40/mt from April.

OTHERS

The Asian acrylonitrile market jumped $70/mt on week at $1,840/mt CFR Far East Asia last week following a cut in term supplies from the Ineos Green lake plant. Customers who received supply from the Green Lake plant will have their term shipments halved for April-June.

Despite strong market fundamental for Asian purified terephthalic acid, market direction remains unclear due to uncertainties in upstream paraxylene market. Meanwhile, PTA fell by only $5/mt to be assessed at $845/mt CFR China over the same period, resulting in high PX-PTA margin of around $203/mt last Thursday, compared with typical range of $130-150/mt.