OUTLOOK '19: Asia BPA markets set for limited fluctuations

Author: Melanie Wee


SINGAPORE (ICIS)--Asia bisphenol A (BPA) markets are poised to see limited fluctuations amid expectations of demand to stabilise at best in early 2019.

Spot prices of BPA in key China markets have slumped in the fourth quarter of 2018, dragged down by dwindling downstream demand, particularly in polycarbonate (PC) and epoxy resin applications.

The largely bearish market was exacerbated by a persistently weak Chinese yuan (CNY) currency to the US dollar, depressed by the China-US trade war, making imports uneconomical.

On a CFR (cost and freight) China basis, spot prices have tumbled to $1,250/tonne as of 21 December, marking a 23% decline from the same period a year ago and lows not seen since October 2017, according to ICIS data.

Chinese domestic prices of BPA have nosedived through most of the fourth quarter and were at CNY 10,700/tonne EXWH as of 21 December.

This was down by 20% from the same period a year earlier, ICIS data showed.

The bearish sentiment might spill over to the first quarter of 2019, amid a slowdown just before the Chinese Lunar New Year festival from 5 February 2019.

“There might be some [BPA] demand in January in China, but February will be quiet … March is uncertain although scheduled plant turnarounds should limit supply,” said a northeast Asia-based market source.

The spread between BPA and raw material phenol in China has also been squeezed from $557/tonne at the start of the third quarter of 2018, to just around $160/tonne towards the end of the fourth quarter.

This has prompted several BPA producers to reduce plant operating rates as part of efforts to combat squeezed margins.

By and large, “February [markets] should be quiet because of the Lunar New Year holiday”, said a northeast Asia-based market source.

Depending on the US-China trade war and crude oil’s price direction, spot BPA prices are not expected to see a significant rebound, according to market participants.

Crude oil prices have weakened considerably in the fourth quarter of 2018, on the back of oversupply concerns and a global economic slowdown.

Several key petrochemicals have also fallen to multi-year lows in the fourth quarter.

China’s manufacturing activity measured by the Caixin China General Purchasing Managers’ Index (PMI) was 50.2 for November, hovering at just above the 50 level.

A PMI reading of 50 or higher indicates an expansion, while a number below that denotes a contraction. The PMI reading was at 50.1 in October.

(Top image: Polycarbonate sheets)

Focus article by Melanie Wee