Asia's petrochemical tells a rosy tale post-Lunar New Year

Author: Felicia Loo

2019/02/04

SINGAPORE (ICIS)--Some petrochemical markets in China are underpinned by prospects of restocking following the Lunar New Year, as inventory drawdowns and steadily firm demand will continue to prevail.

(Source: Imagine China/REX/Shutterstock)

While the outlook across the downstream sector is cleaved, it can be said that a similar picture is painted of some products, that of a garnet red.

When China reopens after the holiday, it will be stock replenishment du jour.

"Look past the [macroeconomic] numbers, China is still vibrant,” one Chinese source said.

Prices of some downstream products are seen to increase in the next few weeks: acetone will face receding supply once a slew of plant maintenance works rolls out; peak second-quarter demand will rise on restocking efforts.

Even prior to the Lunar New Year holidays that starts tomorrow, spot acetone trading was on a roll and cargoes were traded at stronger levels.

A 2,000-tonne cargo of northeast Asia-origin acetone transacted at $450/tonne CFR (cost & freight) CMP (China Main Port) for February shipment, compared with $440/tonne CFR CMP locked for a 2,000-tonne February cargo of Europe-origin earlier last week.

In the week ended 25 January, acetone prices were assessed at $410-440/tonne CFR CMP, ICIS data showed.

Meanwhile, acetone inventories at shore tanks along eastern China have declined to 42,000 tonnes in the week ended 1 February, according to ICIS.

The stocks at Jiangsu ports were down by 6.7% from 45,000 tonnes on 25 January.

The story is similar in other markets such as paraxylene (PX).

Asia's PX supply will tighten following the Lunar New Year: Chinese import demand will pick up in second quarter as China, the world's number 2 economy after the US, enters peak manufacturing season.

There are several PX facilities scheduled for maintenance starting from March.

Japan’s JXTG will shut its 350,000 tonne/year PX plant in Mizushima from mid-February, while China’s CNOOC PX plant in Huizhou that boosts a nameplate capacity of 850,000 tonne/year, will undergo maintenance during March-April.

Needless to say, the outlook of PX in post-holiday is rosy and optimistic given prospects of improved fundamentals.

Asia's acrylonitrile-butadiene-styrene (ABS) market will remain firm as some participants appeared optimistic of stronger post-holiday demand, on hopes that US-China trade talks will yield positive outcomes.

Some buyers who were anticipating an easing of the trade war and tariffs were stocking up resins for post-holiday production.

ABS resins are used for appliances, toys, consumer electronics as well as in the automotive and construction sectors.

Likewise, prices of monoethylene glycol (MEG) are seen on an uptrend amid higher crude oil prices and expectations of improved downstream polyester demand after Chinese New Year.

Latest MEG offers stood at $625-632/tonne CFR CMP against bids and buying indications at $620-628/tonne CFR CMP .

Sentiment in the Asia polyethylene terephthalate (PET) market is positive, buoyed by supply and demand fundamentals.

The outlook after the holiday leans towards bullishness as the typical peak demand season will start soon, which will also support PET prices.

Interest from buyers in the Gulf Cooperation Council (GCC) region has already started to pick up ahead of warmer weather from March, and players are already preparing for increase demand for bottled beverages in summer.

Focus article by Felicia Loo

Additional reporting by Clive Ong, Samuel Wong, Angeline Soh, Eric Su, Hazel Goh and Yoyo Liu