Asian petrochemicals outlook, w/c Jun 17

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AROMATICS

Demand for Asian benzene is expected to continue West-bound towards the US market, with August DDP USG discussions heard at 232-237 cents/gal, or $693.68-708.63/mt, sufficient to cover spot freight between South Korea and the US Gulf Coast heard at approximately $55/mt. Despite an open arbitrage, actual demand for August material may be limited, with supply tightness for prompt material supporting prices in the forward months, a source said. The domestic East China prices have gained steadily last week, following firm crude price and falling import volumes.

The CFR Taiwan/China benchmark paraxylene marker was down $42/mt to $817.67/mt last Friday, week on week. PX prices had regained some momentum towards the end of May, prompting Asian PX producers to defer any cuts in production rates. There were a few PTA plant turnarounds reported towards the end of the week, including a reduction in operating rates for the Yisheng Dalian facility, however, demand would not be very highly impacted, said market players. Some market players said some July demand may bleed into early August, since it may not be fulfilled on time, but August was not as tight as the previous month and traders felt that there was still some room to buy cargoes.

Asian styrene monomer jumped $40/mt on the week to $1,089/mt CFR China and $1,049/mt FOB Korea Friday on the back of supply tightness in South Korea.The supply shortage is expected to persist this week while inventories in East China continued to decline, further supporting the firm styrene prices and production margins, said sources.

Demand in the downstream markets remained weak amid a lack of clear price direction as the market moves into the traditionally weak demand in the third quarter.

OLEFINS

Asian ethylene would likely remain bearish this week, after falling to a 10-year low last Friday. The market would likely be pressured by weak demand as well as a falling global ethylene market. Last Friday, the CIF Northwest Europe ethylene price dived $139/mt week on week to $1,059/mt, S&P Global Platts data showed.

The propylene price in China is likely to stay firm due to the delay in the restart of South Korea's Hanwha Total Petrochemicals cracker, which is buying materials to feed its downstream polypropylene plant. This curbed the supply for imported propylene in China and Chinese buyers were willing to bid higher to secure feedstock given the price hike in domestic propylene price last week.

The Asian butadiene market closed the week up $45-50/mt Friday amid active spot trading. Platts assessed the CFR China and NEA markers at $1,140/mt and FOB Korea at $1,090/mt. South Korea's Hanwha Total continued to experience technical issues at its Daesan cracker, as it was unable to restart by the end of last week. Should South Korean cracker issues continue, prices may strengthen. Raw material butadiene prices rose, downstream styrene butadiene rubber prices inched up $5/mt to $1,400/mt CFR SEA and $1,350/mt CFR China due to weak demand and ample supply, causing SBR margins to fall further.

INTERMEDIATES

Methanol prices in India and China will likely be bearish as a number of cargoes from Iran are expected to arrive in July. Iranian methanol plants were heard to be running at high operating rates. CFR India was assessed at $260/mt last Wednesday, down $2/mt week on week, while CFR China fell $5/mt to $265/mt Friday.

Asian monoethylene glycol prices will likely remain stable this week amid weak supply-demand fundamentals and support from upstream feedstock. MEG prices were rangebound between $531-534/mt CFR China last week. MEG inventories remained ample with around 1.35 million mt at the main ports of east China, typically enough to meet demand for a month, sources said. Still, there was little room for MEG prices to fall sharply as most Asian MEG producers were incurring losses, sources said. The profit margins were calculated to be minus $12/mt and minus $97/mt for naphtha-based and ethylene-based MEG respectively.

The Asian purified terephthalic acid market lacked direction amid a volatile upstream PX market. Feedstock PX soared $21/mt from June 7 to be assessed at $880.67/mt CFR Taiwan/China last Monday, and subsequently tumbled $63/mt to $817.67/mt CFR Taiwan/China last Friday. Demand was healthy with downstream polyester sector operating at 88% of the overall capacity in China, despite a seasonal lull in June.

The acrylonitrile market is expected to trend lower this week as buyers were waiting for a price correction. Some acrylonitrile-butadiene-styrene producers in Asia have cut operating rates and said the Asian ACN price will need to slip to the low-$1,800s/mt before buyers can make further purchases. Asian ACN was assessed down $40/mt at $1,880/mt CFR Far East Asia last Tuesday.

POLYMERS

Asian polyethylene would likely remain soft this week during a seasonal lull.

Market participants are also closely monitoring the restart of Malaysia's Pengerang Refining and Petrochemical steam cracker. According to sources close to the company, it will restart the unit in July. The cracker supplies ethylene to its downstream PE units.

Asian polypropylene would likely come down this week, after falling $10-$60/mt week on week last week. PP supplies in China were seen to be heavy, which triggered exports from China to Southeast Asia and India.

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