OUTLOOK ’18: Asia BPA prices gear for potential upside

SINGAPORE (ICIS)–Asia’s bisphenol A (BPA) markets are set for exciting times ahead as sturdy downstream engineering plastics demand continue to spur consumption of the raw material, even as anti-dumping duties are being levied on imports to China.

BPA spot prices have jumped by $100/tonne in a single week ended 15 December, taking CFR (cost & freight) China prices to a more than three-year high, levels not seen since late November 2014.

Spot prices are poised to continue the uptrend, amid strong buying demand in downstream epoxy resins and polycarbonate markets, combined with tight supply.

Mandatory Credit: Photo by View Pictures/REX/Shutterstock (5378996a)

The recent spike in China spot prices coincided with the country’s Ministry of Commerce levying anti-dumping (ADD) deposits on BPA imports originating from Thailand effective 9 November as a temporary measure. The deposit rates are namely 10.1% for Thailand’s PTT Phenol and 31% for all other producers.

The ongoing ADD investigation, which typically takes a year to complete, started from 6 March 2017.

Thailand’s PTT Phenol, a major source of import supply into China, may well scale back on cargo flows from its 150,000 tonne/year BPA plant in Map Ta Phut to China in the near term, given the higher costs.

The firm has since trimmed operating rates at this BPA plant in December by about 15% of capacity from full tilt previously.

Prices of phenol in China, the raw material for BPA, have seen substantial gains in recent weeks, following a surge in Chinese domestic prices. This has consequently generated upward pressure on spot prices of BPA as producers worked towards passing on these costs to consumers.

BPA markets are geared towards a potential upswing as expanding downstream polycarbonate (PC) capacity may well encourage demand for the raw material.

The start-up of Yantai Chemical’s new 70,000 tonnes/year polycarbonate (PC) plant located in Yantai, Shandong province within the year’s end at the earliest is envisaged by market players to be a game-changer in keeping BPA demand in China on the boil.

The PC plant’s monthly consumption of BPA is estimated at up to 5,000 tonnes.

“The new [PC] plant is seeing more buying activity of BPA and will continue,” a northeast Asia-based market source said.

The current supply squeeze in spot cargo availability has prompted BPA producers both in Chinese domestic markets and on the international front to raise their offers owing to limited supplies on hand, as have several traders.

Further boosting market sentiment, end-users are scooping up BPA supplies ahead of the Lunar New Year holiday that takes place in February 2018.

Against a backdrop of expanding downstream capacity, it is worth noting there are no significant new BPA capacities coming on stream in the near term.

In other words, the existing capacities in Asia Pacific are theoretically set to match what seems to be rising consumer demand for BPA, notably in recent months.

BPA producers in Asia Pacific to some extent are also closely monitoring volatility in upstream related phenol as well as benzene prices, which may well temper market sentiment as a whole in the foreseeable months to come.

The spread between BPA and raw material benzene, often used to measure the strength of BPA against benzene has stood at a monthly average of about $450/tonne in 2016-2017, wider than just around $400/tonne in 2013.

Whether the upward price momentum will prevail in the greater part of 2018 remains to be seen, as the market braces itself.

(Top image: Polycarbonate sheets: Photographer: View Pictures/REX/Shutterstock)

Outlook article by Melanie Wee