Asia petrochemical outlook, w/c Feb 10.

Petrotahlil -

ISOMER MX

Isomer-grade mixed xylene prices are likely to be taking cues from the China market this week amid the coronavirus outbreak, as well as upstream and downstream prices, especially paraxylene. The FOB Korea marker fell to a near four-year low last week, at $601/mt as downstream demand was impacted by transportation restrictions in China, and the East China MX inventory more than doubled to over 60,000 mt.

PARAXYLENE

Weakness in Asian paraxylene persisted, with prices continuing to track the related markets. As the extended public holiday ends in China, market players are closely watching the return of workers in China amid a surge in inventories caused by transportation delays and logistic issues. Market players across the Asian petrochemicals market are worried about the impact of the virus on manufacturing capacity within China, and the labour-intensive polyester industry, which is already showing signs of a slowdown as workers are deterred from returning to their jobs.

STYRENE

The weakness in styrene is likely to extend this week amid subdued demand from downstream ABS/PS producers. Despite the return of some market participants, ABS/PS plants have kept their operating rates low as the coronavirus outbreak continued to ravage logistic chains. Inventory stood at higher levels in east China due to slow pickups. The market is closely eyeing the price movement in feedstock benzene, as producers would be forced to cut runs amid negative margins.

TOLUENE

The Asian toluene market faces a crucial week as all participants are closely monitoring the China market's official return to business-as-usual mode for any possible recovery in demand. China has been struggling to manage the inventory at the ports. Domestic destocking via more gasoline-blending activities and more local deliveries may be able to alleviate the excessive stockbuild. FOB Korea toluene marker touched a near eight-month low at $584/mt on February 5 and the level may be tested again soon. Separately, with a few upcoming turnarounds in March, such as GS Caltex's 785,000 b/d Yeosu refinery, the impact on supply-demand balance could be more pronounced.

METHANOL

An unexpected plant outage for a major Southeast Asian methanol producer could lend some upside to the Asian methanol market if the plants do not restart this week as scheduled.

Malaysian methanol producer, Petronas Chemicals Marketing (Labuan), 660,000 mt/year No.1 plant and its 1.7 million mt/year No.2 plant went down last week due to technical issues.

Trade sources said one of the two plants were slated to restart this week and that 20,000 mt of methanol, which was originally scheduled to load mid-February for China, has now been cancelled and placed in Southeast Asia instead.

As a result, a major producer received a flurry of inquiries from Petronas' end-users in China and Taiwan.

CFR China methanol was assessed at $230/mt China Friday, up $1/mt on the day, but down $10/mt on the week.

ETHYLENE

The Northeast Asia ethylene market lacks direction, while market participants are closely monitoring Chinese demand, operation rate for crackers and ethylene derivatives plants in China. Market sources predict greater availability of spot ethylene cargoes than demand, as a major Taiwan producer canceled its ethylene selling tender due to low bids. On the other hand, in Southeast Asia, ethylene prices remained soft, as most buyers have completed February arrival procurement and buying activity is expected to slow down this week.

PROPYLENE

The market outlook for propylene is likely to trend lower this week, as logistic woes and lackluster demand amid the ongoing spread of coronavirus across China hit demand.

Many downstream polypropylene plants in China were heard to have reduced their operating rates or shut down as they were not able to transport their products to the customers due to the closure of major roads in eastern China. Zhejiang Shaoxing Sanyuan Petrochemical shut its 300,000/mt yr polypropylene plant last week while Fujian Medie shut one of its 500,000/mt polypropylene yr unit last week.

Platts CFR China marker stood at a three-year low of $800/mt CFR China last Friday, and market sources said it is likely to hit below the $800/mt psychological level this week.

PE: Asia linear low density polyethylene prices fell sharply in China due to weak demand stemming from the coronavirus outbreak.

However, LDPE in Southeast Asia was stable, despite subdued demand, as supply tightened following production cuts in the Middle East and Southeast Asia.

Some producers had cut operating rates seeing that feedstock ethylene prices were too high, but converters have held back purchases, hoping the market would retreat post the Lunar New Year holiday as the coronavirus outbreak weighs.

Buyers were cautious, as they were unsure when the economy would recover from the outbreak.

PP: Asia's polypropylene market declined on the week in northeast and southeast Asia due to sluggish demand on the back of the coronavirus outbreak.

Chinese inventories rose to around 1.175 million mt amid the lack of downstream demand, market sources said. More Chinese traders are looking for new export outlets to clear out cargoes at the port. Demand for medical-use polymers, such as non-woven polypropylene, was expected to increase due to the outbreak, market sources said.

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Source : Platts

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