Asia petrochemicals outlook, w/c July 6

Petrotahlil — The Asian petrochemicals market outlook remains mixed in the week started July 5, with propylene and methanol markets expected to receive support on resilience in restocking needs and tight spot supply. Other markets, such as paraxylene and purified terephthalic acid, are seen staying bearish as they grapple with a supply glut and sluggish demand.

PROPYLENE

The propylene market is likely to gain traction on stronger replenishing demand and tight supply. Buoyed by stronger downstream demand, more China-based buyers were looking for propylene feedstock.

Taiwan's CPC is restarting its No. 4 naphtha-fed steam cracker July 6 after the plant was shut down July 2 due to a technical fault. Term customers of the producer expect a cut in their term supply for July.

ACRYLONITRILE

The acrylonitrile market is under pressure after Zhejiang Petrochemical, which had started its new 260,000 mt/year plant on June 23 and produced on specification material in the week ended July 4, is now running at 80%. This pushed down prices for ACN as buyers in China were waiting for price to go softer before taking their positions.

POLYPROPYLENE

The uptrend for Asian polypropylene prices is facing some resistance from customers after the PP CFR Northeast Asia marker rose 32% from April to hit around $900/mt since end-June. Market views remain divided on the outlook amid tight prompt spot availability and upcoming new startups in the third quarter.

METHANOL

The China methanol market could see some upside with thin liquidity for imported non-sanctioned cargoes for August, but supply of sanctioned methanol remains ample, trade sources said. In South Korea and Southeast Asia, demand for prompt spot cargoes for delivery into the first half of August will likely boost prices in the week started July 5, as a number of Middle East suppliers have already allocated their volumes.

PARAXYLENE

PX sentiments remained bearish with weakness attributed to growing pressure on prompt physical cargoes, slower-than-expected demand recovery, and persistently high inventories. Market sources continue to anticipate an easing of the supply overhang following poor production margins since late May, which have triggered considerations to reduce operating rates. Multiple sources commented on the lack of bullish factors and demand concerns, and added that a second wave of COVID-19 infections could further dampen demand recovery and market outlook.

PURIFIED TEREPHTHALIC ACID

Market participants generally see a lack of direction for the Asian PTA market, with sellers and buyers unable to reach consensus on PTA prices for dollar-denominated cargoes. The market sentiment is likely to remain bearish amid high stocks and uncertain demand, but the room for PTA prices to fall further is limited due to squeezed PTA profit margins, sources said.

MONOETHYLENE GLYCOL

Asian monoethylene glycol was assessed up $5/mt day on day July 3 amid rising raw material prices and gains further upstream, market sources said. However, a slow drawdown in China's high levels domestic stocks, growing logistical constraints on MEG imports, and the return of refineries after maintenance could reduce the country's demand for seaborne MEG in coming weeks, market sources said. Inventories continued to be heard high at around 1.4 million mt, they said.

BENZENE

Market sources generally agreed that the possibility of a large rebound in the strength of the FOB Korea benchmark relative to naphtha was unlikely in the weeks to come, with deepsea-origin material leaving Asia in a state of supply length. However, several market sources were of the opinion that the spread would track a gradual recovery, as Asian refineries begin to announce rate cuts to combat the oversupply. On the other hand, one source noted that the benzene-naphtha spread had briefly flipped into negative in March 2019, making it a possible occurrence yet again.

TOLUENE

From the gasoline-blending front, a tight race is expected within the Asian market between toluene and MTBE as the latter blendstock had been catching up lately in terms of lower price level. The trading period for H1 August loading cargoes appeared tight, as the current week is short, and oversupply in the region remained a lingering concern. In east China, toluene inventory accumulated to 70,000 mt,, and was the largest stockpile recorded in more than a year. The stockpile was at the same level on the week ended April 18 one year ago.

The CFR China toluene physical stood at $429/mt on July 3, the weakest level month to date.