China EO may extend falls on weak C2, poor amines demand

SINGAPORE (ICIS)–China’s ethylene oxide (EO) prices may decline further along with feedstock ethylene values, as downstream ethanolamines demand remains sluggish, market sources said on Tuesday.

EO prices recently fell to a four-month low, exerting downward pressure on amines values in the domestic Chinese market.

For the week ended 22 July, EO prices in eastern China fell to yuan (CNY) 8,300/tonne ($1,337/tonne) EXWH (ex-warehouse), down by CNY600/tonne from the previous week, according to ICIS.

“The market is expecting further slumps in EO prices and downstream demand is poor,” said one market participant.

EO prices are currently at their weakest level since 25 March 2015, according to ICIS data.

The bearish sentiment in China deepened as ethylene prices continued to slide and are expected to fall further, keeping many buyers on the sidelines.

Chinese yuan-denominated transactions for amines slumped during the week ended 22 July, reflecting market discussion levels and bearish market fundamentals after EO prices tanked.

Falling ethylene prices have also been pulling down domestic amines prices in China, as buyers were procuring material on a need-to basis, keeping transaction volumes limited. The market was awash with supply, with further price cuts imminent.

Diethanolamines (DEA) prices fell to yuan (CNY) 8,200-8,900/tonne EXWH during the week ended 22 July, down by 5% from the previous week. The prices included domestic deals for bulk DEA at CNY7,800/tonne EXWH levels.

Poor demand for downstream surfactants persisted in the market and buying interest remained limited.

On the local monoethanolamines (MEA) market, prices receded 4.5% week on week to CNY8,200-8,900/tonne EXWH.

Chinese domestic triethanolamines (TEA) price discussions declined 8.4% over the same period to CNY8,500-9,000/tonne EXWH.

Ethylene spot prices in northeast Asia fell by $10/tonne during the week ended 24 July to $1,150-1,180/tonne CFR NE Asia, a result of bearish sentiment and supply overhang of regional cargoes.

Plastics demand in China faces downward pressure as the world’s second-biggest economy slows down.

China’s GDP grew by 7.0% year on year in the second quarter of this year, unchanged from the first quarter.

In 2014, the economy posted an average growth of 7.4% – slower than the 7.7% expansion in the previous year and its weakest annual growth since 1990.

Focus article by Felicia Loo

($1 = CNY6.21)