Asia petrochemical trades slow down ahead of China’s Golden Week

SINGAPORE (ICIS)–Asia’s petrochemical trades have slowed down as China – a key market in the region – will go on a week-long holiday in October.

Container port in Qingdao, China. (Photographer: Yu Fangping/Pacific Press via ZUMA Wire/REX/Shutterstock)

Trading activity is expected to pick up in mid-October when Chinese players are back in the market.

China is a major importer of petrochemicals in Asia, and also a key supplier of some of those products in the region.

Traders in some markets were hesitant to make big purchases ahead of China’s National Day holiday on 1-7 October, also called a Golden Week.

In the propylene market, spot prices in northeast Asia have recently hit a 2018 high on the back of tight supply and restocking activities.

Spot supply of propylene has been tight in northeast Asia due to ongoing turnarounds at production facilities in Japan, while demand has slightly improved as some buyers in China were looking to snap up cargoes before markets close next week.

But as plants will continue to run during the holiday, there are concerns that an expected build-up in domestic propylene inventory could weigh on prices post-holiday.

In the butadiene (BD) market, some Chinese buyers were tapping the spot regional market for cargoes this week, although buyers are reluctant to lock in on any large spot volumes for November in light of declining prices and sluggish downstream synthetic rubber and acrylonitrile butadiene styrene (ABS) markets.

In the polycarbonate (PC) market, spot import negotiations for October delivery of most grades were slow at the start of the week.

“Market participants were in no rush to commit to imports, ahead of China’s Golden Week holiday,” a source said.

China’s domestic market is awash with supply, which will further increase due to recent capacity expansions. Meanwhile, lacklustre demand for upstream raw material bisphenol A (BPA) is also weighing on sentiment in the PC market.

In the 1,4-butanediol (BDO) market, players have concluded their discussions for forward-month trades.

Pre-holiday restocking hit the market, easing the inventory pressure among Chinese BDO producers, which were initially long in supply.

In the adipic acid market, in which China is a major exporter, Chinese producers have maintained firm export offers despite weakness in the domestic market, as they expect a clearer price direction to emerge after the holiday.

In the melamine market, major Chinese exporters have raised offers in line with higher feedstock cost and increasing buying enquiries before the Golden Week.

Some downstream users started to build inventories in the week on concerns that melamine prices would increase sharply after the holiday.

Melamine prices typically spike in the fourth quarter due to strong demand.

In China’s domestic market, spot discussions for high-speed spinning nylon chips have weakened in the past week, while trading momentum has also slowed down in the local methyl isobutyl ketone (MIBK) market.

In the ethylene propylene diene monomer (EPDM) market, offers have remained stable from the previous week as most suppliers have taken a wait-and-see stance on the market.

Focus article by Nurluqman Suratman

Additional reporting by Judith Wang, Angeline Soh, Helen Yan, Melanie Wee, Zhi Xuan Ho, Matthew Chong and Joson Ng