Asia petrochemical markets slump on faltering demand

SINGAPORE (ICIS)–Asia’s petrochemical markets are expected to remain soft through to the end of the year, in view of sharp declines in crude oil prices, as deteriorating global economic outlook amid the US-China trade war is depressing downstream demand.

Spot prices of key petrochemicals such as ethylene, propylene, methanol, benzene, toluene and styrene monomer (SM) have been on a general downtrend over the last month.

Containers at the Port of Qingdao in Shandong province, China. (Photo by WU HONG/EPA-EFE/REX/Shutterstock)

Ethylene prices have rebounded in early November on restocking activity after hitting a multi-year low of $900/tonne CFR (cost & freight) NE (northeast) Asia on 2 November, but prices are still currently lower compared with a month earlier.

Major derivative markets such as styrene monomer (SM), monoethylene glycol (MEG) and polyethylene (PE) have continued to register lower numbers amid bearish market sentiment across Asia.

In the styrene monomer (SM) market, regional hit a low not seen since end-May 2017 on 13 November on faltering demand from China and ample supply.

Offtakes were slow from downstream expandable polystyrene (EPS) and acrylonitrile-butadiene-styrene (ABS) sectors.

Regional PE prices are under strong downward pressure, with those in the key China market slumping since October due to poor demand and ample supply.

In the domestic market,  low density polyethylene (LDPE) prices in China fell to their lowest level in more than two years, while prices of  high density PE (HDPE) plunged to a near 16-month low.

Import prices of LLDPE, meanwhile, declined to levels last seen in July-August 2017, while LDPE plunged to its lowest since March 2009.

In the case of propylene, spot prices nosedived to their lowest so far this year after five straight weeks of decline, in line with losses in China’s domestic market.

This has dragged down regional prices of main downstream polypropylene (PP).

Based on ICIS assessments in the week ended 16 November, China’s domestic and import prices of PP have shed 8.6% and 6.9%, respectively, from 12 October; while in southeast Asia, import prices of the polymer fell 4.7% from late October.

Methanol prices in China fell last week to their lowest so far in 2018 due to  long supply and poor downstream markets.

Ample availability of Iranian spot methanol cargoes as a result of the US’ sanctions on the material has also weighed on regional spot prices.

At the root of the poor sentiment in Asia’s petrochemical markets is tumbling upstream crude prices, as industry players are increasingly becoming wary of an imminent global economic slowdown amid unresolved trade tensions between the US and China.

Brent crude oil prices have lost about 27% of its value since early October to $62.60/bbl on 23 November.

Petrochemical feedstock naphtha fell to a 14-month low on Friday, pummelled by concerns over a supply glut.

Aromatics products such as benzene and paraxylene (PX) closely tracks the movement in upstream crude prices.

At midday, spot benzene prices were at $660.00/tonne FOB Korea, down 13.5% from levels on 26 October, according to ICIS data.

PX prices on 22 November stood at $1,060-$1,062/tonne FOB South Korea, shedding 14% in a span of one month.

Prices have mostly tracked the losses seen in upstream crude and naphtha markets, while downstream purified terephthalic acid (PTA) and polyester markets have showed no signs of improvement.

Downstream linear alkylbenzene (LAB) prices in southeast Asia fell to a six-month low this week following the plunge in crude values, extending the downtrend since late June this year.

Toluene prices have also fallen below $700/tonne FOB Korea because of poor fundamentals, with solvents demand from southeast Asia and India weakening amid increased supply as several regional plants restarted.

Crude prices are expected to remain under pressure due to the expected global economic slowdown in 2019 as the trade war between the world’s two biggest economies escalates.

List of other Asian petrochemical products that registered hefty price declines:

– Asia MEK market bearish amid slump in China domestic prices

– SE Asia MA slumps to year-low on soft feedstock; demand to stay weak

– Asia EPS hits fresh low on ample supply & low feedstock; outlook poor

– Asia BPA near 12-month low, outlook bearish on dismal import demand

– Asia’s acetic acid price correction prevails on ease in tight supply, outlook mixed

– Asia IPA sentiment bearish on falling Chinese domestic prices

– Mideast, Asia PE pipe grade outlook bearish amid steep China decline

– Asia SAN tumbles on weak demand, prospects bearish

Additional reporting by Yeow Pei Lin, Helen Yan, Trixie Yap, Leanne Tan, Lucy Shuai, Joson Ng, Yuanlin Koh, Lim Ai Teng, Dora Xue, Angie Li and Pearl Bantillo

Interactive and Focus by Nurluqman Suratman

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