Petrotahlil — Asian petrochemical fundamentals will likely be stable-to-firm for the week starting July 13, on the back of firmer upstream energy complex and replenishing demand.
However, there are still uncertainties amid persistent COVID-19 spread globally, and concerns on the economic slowdown.
Sentiments in Asian PX are expected to remain bearish after the spread to naphtha hit a record low of $136.25/mt on July 9 amid slow demand recovery. Market participants are looking to port and laycan declarations for August-delivery cargoes that may provide greater clarity for the market, said sources.
Spread between FOB Korea toluene versus CFR Japan naphtha physical narrowed to a single digit level at plus $9.25/mt on July 9. The tight profit margins were pressuring toluene suppliers to scramble for outlets within the region as opposed to focusing only on China, although broadly, the Asia had been mired with excess surplus. Blending demand from gasoline market, the key sector for toluene, would most likely encounter further headwinds as China increased export quotas for local refiners.
The Asian MTBE market continues to be stable-to-firm this week as upstream crude oil and gasoline markets stay bullish. 92 RON crack against the front-month ICE Brent crude rebounded at $1/b level on July 10 and the 95 RON/92 RON spread widened.
However, there are hovering concerns on lengthening MTBE supplies in the H2 2020, due to the new MTBE plants startup as well as the deep-sea cargo flow into Asia.
The outlook for propylene market in Asia remained strong this week as resilience in replenishing needs and ongoing supply shortage is likely to push up the spot price this week.
Zhejiang petrochemical is running its new 260,000 mt/year plant at 80% operating rate and is likely to maintain this rate for the rest of July.
Nevertheless, the hike in spot supply meant the price for acrylonitrile is likely to be on the correction mode this week.
The Asian purified terephthalic acid market is likely to remain rangebound as trade participants continue seeking market direction amid squeezed profit margin and uncertain demand. China's Hengli Petrochemical has started the second train and ramped up the operation rate of its new 2.5 million mt/year PTA line at Dalian to around 85% over the weekend, two sources familiar with the matter said on July 13. This could not be immediately and directly confirmed with the company source.
Asian polypropylene is expected to stay firm amid limited offers and firm upstream prices. Nevertheless, demand generally remains slow and uncertain, though improving, in most of Asian regions. Market views remain divided for PP outlook, with producers citing tight spot availability, while buyers feel it is hard to accept high PP prices with an uptrend seen since April.