Asia's chemical trade sullen post-China holiday on interminable trade war

Author: Felicia Loo

2019/10/10

SINGAPORE (ICIS)--In Asia, petrochemical trade remains dull as dishwater, days after key market China resumes business post-National Day holidays (1-7 October), largely owing to the fact that buyers are sidelined in a nebulous climate when the trade war seems interminable.

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Confidence in the world economy is fast eroding as the US and China fail to ameliorate the issues from the protracted trade dispute, persisting for over a year.

Businesses cannot push ahead aggressively amid uncertainty that remains elevated as the previous rounds of trade talks have not yielded much result, while another round of talks is to begin on 10 October.

Because of slowing trade, the global economy is facing widespread deceleration partly which will see overall growth this year falling to its lowest rate since the beginning of the decade, the International Monetary Fund (IMF) said early this week.

In 2019, the IMF expects slower growth in nearly 90% of the world, IMF managing director Kristalina Georgieva said.

On petrochemicals, the polyethylene (PE) market in southeast Asia  is expected to stay muted till the next round of offers towards the end of October for November shipment cargoes, as most importers had purchased their cargoes before and during China’s holidays.

Buyers anticipate competitive offers from suppliers, particularly for US-origin cargoes, as they may be under inventory pressure and need to destock before the end of the year.

“Some Middle East and southeast Asian producers are keeping their offers firm now but they may need to revise down their prices when the market becomes more competitive,” said an Indonesian converter.

Similarly, market discussions were thin on northeast Asia-origin bisphenol A (BPA) shipments bound for China, with trading activity in part hampered by regional holidays in South Korea and Taiwan from mid-week.

Selling indications for late-October arrival parcels were at $1,150-1,200/tonne CFR (cost and freight) China, yielding lukewarm buying appetite.

Supply availability was perceived as less snug than before, with regional plants returning from planned turnarounds or bringing operating rates back to normal this month.

Taiwan’s Nan Ya Plastics restarted from 4 October two lines at its 450,000 tonne/year BPA plant in Mailiao after a scheduled month-long turnaround.

China’s Shandong Lihuayi Weiyuan’s new 120,000 tonne/year BPA plant operating normally is set to lift production and free up supply availability in the coming days.

Chinese demand for styrene butadiene rubber (SBR) is expected to remain soft for the rest of the year amid slump in the domestic auto sector.

Spot discussions and trades were muted this week despite the return of Chinese market players following their holidays.

China’s vehicles market continued a downtrend in August, with sales in the month down by 6.9% from year-ago levels to 1.96m units, data from China Association of Automobile Manufacturers (CAAM) showed.

On Asian acrylonitrile-butadiene-styrene (ABS), demand in the fourth quarter – a traditionally slower period for the resin – is softening as the third-quarter manufacturing for exports season is over in key market China.

Participants in China have returned from their holiday, but trade in the Asian ABS market remained quiet.

Spot prices in China remained in the $1,400s/tonne CFR China range, with buyers largely in a wait-and-see mode.

Octene-based (C8) metallocene linear low density polyethylene (MLLDPE) supply in Asia is expected to remain ample against a backdrop of sluggish demand in China, as slow macroeconomic conditions continue to take a toll on sentiment.

C8 MLLDPE prices are usually higher in comparison to that of C6 MLLDPE, or at the very least, on par.

Average spreads between the two grades in China for 2018 stood at around $20/tonne, with C8 MLLDPE typically selling at a premium to C6 MLLDPE.

However, C8 MLLDPE spot prices have fallen below that of C6 MLLDPE in recent weeks.

Additional reporting by Helen Yan, Clive Ong, Felita Widjaja, Nurluqman Suratman, Leanne Tan and Melanie Wee

Focus article by Felicia Loo

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