Asia petrochemicals outlook, w/c Nov 19

OLEFINS

The Asian butadiene market was expected to find direction this week as buyers hunted for suitable fixed prices. This follows mixed signals last week when buyers hung back from procuring amid a weaker acrylonitrile butadiene styrene market and upstream crude oil prices tumbling, which hindered some buyers from settling trades despite the demand seen for December laycan cargoes.

A supply glut was seen weighing on the propylene market this week. A number of Chinese propane dehydrogenation plants have completed turnarounds since the end of October and have since been operating at high rates, leading to a pile-up of inventory in China. Chinese end-users are showing strong resistance to seaborne procurement as they think the market has yet to bottom out.

Asian ethylene market sentiment is expected to remain firm this week, supported by healthy demand in China and despite price downtrends in most ethylene derivatives markets, notably styrene monomer.

Steam cracker operations will likely remain high as the latest ethylene price increase has widened the price spread between it and naphtha. The ethylene-naphtha price spread was calculated at $484.75/mt last Friday, well above the typical breakeven spread of plus $350/mt, S&P Global Platts data showed.

AROMATICS

In spite of an uptick in sentiment Friday, paraxylene traders were mostly cautious Monday, preferring to adopt a wait-and-see stance amid a reduction in demand due to multiple PTA plant shutdowns in China over December-January due to poor polyester margins and inventory pressure.

With benzene prices on a downtrend as demand fails to keep up with supply, several market participants said it was possible that future discussions for 2019 cargo premiums would fall further.

A major buy tender for benzene on a CFR North Asia basis concluded at mid-single digit premiums to the FOB Korea benchmark last week. This marked a fall from 2018 term contracts, which were concluded at premiums of $13-$15/mt.

Oversupply also continues to weigh on the Asian styrene market, with heavy inventory seen in November and December, and stocks in East China rising.

Market participants noted there was more room for styrene to fall further given the healthy margins, and despite the freefall in October. Further, weak downstream demand is likely to persist as demand is typically slow at the end of the year. Asian styrene on a CFR China basis fell $63.50/mt on the week to last Friday. The downtrend in the acrylonitrile-butadiene-styrene/polystyrene market is also seen likely to continue on persistently weak demand. Trading activity was expected to to be thin this week, with buying interest weak in the leadup to year end. Downstream end-users are likely to continue holding back purchases despite softer prices and sentiment in the market to remain bearish.

POLYMERS

Demand in the Asian high density polyethylene film market is likely to be weak this week as the US-China trade dispute weighs on demand for downstream products. Trade sources said several orders for toys, plastic bags and packaging material have been canceled due to the dispute and downstream customers were not willing to procure more PE cargoes.

Activity in the LDPE markets in China and India is expected to be tepid this week. Market sources said cargoes of various origins such as Mexico, Thailand, the Middle East and India were being offered but buyers showed no interest as prices continued falling.

INTERMEDIATES

Sentiment in the Asian monoethylene glycol market is expected to be bullish this week on the back of buying interest stemming from relatively low prices. The launch of MEG futures on the Dalian Commodity Exchange should give the market added impetus. The China Securities Regulatory Commission Friday approved the launch of MEG futures contracts on the DCE, which will be officially listed for trading from December 10.

Overall market sentiment remained bearish for Asian purified terephthalic acid Monday. Several Northeast Asia PTA producers said they would cut operating rates to support prices.