Asia fuel and petrochemical supply on the rise after China’s Golden Week

SINGAPORE (ICIS)–In Asia, supply will be on the rise for fuels and some petrochemicals after the Golden Week holidays (1-7 October) in key market China.

The overall demand situation is deemed weak as a result of the ongoing US-China trade war, notwithstanding improving economic indicators in China, the world’s number-two economy after the US.

Caixin’s China general manufacturing purchasing managers’ index (PMI) rose to 51.4 in September from 50.4 in August amid a rise in overall orders, while the country’s official manufacturing PMI rose to 49.8 in September from 49.5 in August.

China’s Shandong independent refiners may face mounting inventories of gasoil and gasoline, and sales pressure after the National Day holidays because of fewer working days in the month.

Styrene monomer (SM) supply in China will increase on higher inventories and more domestic output in October despite several upcoming plant turnarounds.

Many players expect that SM inventory levels in east China may increase to above 120,000 tonnes in the week after the holidays due to the delayed shipment arrivals.

“SM supply will increase in October but demand may remain stable. While the market may face some pressure, prices cannot drop too much,” said a trader in east China.

On mixed aromatics in China, supply of mixed aromatics may increase significantly after the Golden Week, as importers who have been enjoying healthy profits, have nearly exhausted inventories at domestic ports.

Octobers arrivals in China may rebound to 100,000 tonnes, according to sources.

China’s methyl tertiary butyl ether (MTBE) supply is expected to gradually increase amid improved margins, though demand may weaken due to lower gasoline consumption after the National Day holiday.

With expected rising supply, Chinese domestic exporters are in active discussions to ship out more MTBE in October.

The Asian paraxylene (PX) market is unlikely to elude a longer supply going forward as demand will stay weak while new capacities are due to come on stream before the end of the year.

Production margins of downstream purified terephthalic acid (PTA) are being squeezed, prompting several PTA producers in China to shut their facilities for upcoming maintenance.

In Asia’s styrene-acrylonitrile (SAN) markets, suppliers had increased offers in a bid to boost margins, which have been squeezed in recent months; some sellers concede sales would likely stay low post Chinese holidays, as the third quarter manufacturing for exports season will have ended.

The production season in the third quarter this year was particularly weak amid the trade woes.

Meanwhile, ethylene supply in Japan and China could remain ample as the ongoing production issues at some downstream plants are expected to persist until at least the end of October or early November.

On monoethylene glycol (MEG), earlier concerns on supply disruption from the Middle East were dispelled amid a sooner-than-expected recovery in Saudi feedstock supply, although a major Middle East producer was heard to still supply minimum contract volumes to its customers.

The upcoming start-ups of two major MEG plants in the US and Malaysia also weighed on the market sentiment as a total of 1.5m tonnes/year of new MEG capacities will come on stream in October, market sources said.

Additional reporting by Tina Zhang, Claire Gao, Clive Ong, Winnie Huang, Samuel Wong, Yiting Tang, Judith Wang, Nurluqman Suratman and Pei lin Yeow

(Top image: Shutterstock)

Focus article by Felicia Loo