By John Richardson
EVERYWHERE you look across China's petrochemical markets the story is the same as in polyethylene (PE): Exceptionally weak demand during a time of the year when demand should be good.
Take purified terephthalic acid (PTA) as an example.
"Asia's purified PTA spot prices fell in the week ended 15 March on reflection of lower discussion and transaction prices," wrote ICIS pricing's Asia fibre intermediates, Becky Zhang, in her 15 March report.
"A 1.6% fall in PTA futures on 12 March weighed on buying and selling indications to a 15-week low. Mild upward corrections in PTA futures on 13-14 March stabilised buying sentiment, but were not able to drive up prices back to the levels seen in the previous week because of weak demand."
High inventories were reported up and down the value chain.
Earlier this week, Asia's spot benzene prices fell to a 23-week low as a result of lower prices in both the US and China, according to Asia aromatics editor, Ong Sheau Ling.
Demand for overseas benzene in China was low because domestic prices were lower than those on international markets, added Ong Sheau. This pattern is common across many products.
Asia's toluene prices have also fallen to an eight-and-a-half month low on high stock levels in China.
Petrochemicals markets might take heart from the improvement in the HSBC Purchasing Manager's Flash Index for China. The March index rose to 51.7 in March from 50.4 in February. However, it remained below a two-year high of 52.3 in January.
But one should be very cautious about reading too much into this.
The blog had six discussions with chemicals traders yesterday, who trade in products ranging from speciality polymers to benzene, and they all said that demand was exceptionally weak. Commodities demand in general remains poor, according to this Reuters report.
Weak January and February electricity output figures mean that first quarter GDP growth is likely to be slower than the fourth quarter's 7.9%, said Capital Economics economists Mark Williams and Qinwei Wang.
"They also looked at a drop in domestic freight volumes, but conceded construction activity and port volumes have improved," the Reuters article added.
"Taken together, the signs are that 'economic growth is slowing in the current quarter, much sooner than most had expected,' " Williams and Wang concluded.
Capital Economics added that growth in (quarter-on-quarter) terms has dropped back to the pace seen in mid-2012, before the policy-driven rebound took effect.
This is consistent with evidence that China is withdrawing economic stimulus as it tries to deal with inflation and excessive credit growth.
"China's got a head cold, and it's going to take awhile to get going but it will," Stephen Pryor, CEO of ExxonMobil Chemical, said during a panel discussion at the IHS World Petrochemical Conference in Houston earlier this week.
We wish we could share his unequivocal confidence.