Asia’s plastics in limbo amid stalled progress in US-China trade war

Author: Felicia Loo

2019/11/14

SINGAPORE (ICIS)--Asia’s petrochemical markets remain weak amid stalled progress in the US-China trade feud, as sentiment has devolved into bearishness particularly at the end of the year when buyers are also keen to keep lean stocks.

LEGO toys made out of ABS, a derivative of ACN. (James Gourley/REX/Shutterstock)

Buying momentum for import acrylonitrile-butadiene-styrene (ABS) cargoes remains tepid amid the traditionally slower fourth quarter of the year.

Some sellers concede that demand would likely show limited improvement in the near term as production for the year has largely been completed.

While margins remained adequate so far, resins suppliers remained concerned that profitability could be eroded in the near term should ABS market weaken significantly.

On paraxylene (PX), higher costs faced by Asian PX producers, coupled with stable to soft demand seen in the downstream markets, have resulted in producers continuing to face squeezed production margins.

Relatively firm feedstock naphtha costs, coupled with weak by-product benzene prices, have exerted downward cost pressure for aromatics producers.

Despite ongoing shutdowns at PX facilities, and limited availability for prompt-lifting cargoes, price gains were largely met by resistance from end-users.

“Demand has been curbed, with downstream PTA production margins coming under pressure. Polyester sector demand has slowed as a result of unfavorable global macroeconomic outlook," said an industry source.

Demand for high-cis polybutadiene rubber remained soft because of the slump in the automotive sector.

Spot trades were limited due to the uncertain market outlook and declining feedstock butadiene (BD) price.

Rising natural rubber (NR) prices helped bolster and support selling interest, with the major Asian PBR makers keeping offers unchanged despite prevailing softness in demand.

Further downstream, acetic acid prices in Asia extended previous losses last week to levels last seen around May and July; a supply glut in China led suppliers to lower export offers to levels last seen around early July 2019 when the average plant operating rates of 85% in China were lower than the prevailing 89%.

Looking ahead, the lack of acetic acid supply shortage in Asia following the completion of most plant turnarounds for the year, coupled with healthy acetic acid price premiums over methanol feedstock costs in China, may continue to depress the market.

On methyl ethyl ketone (MEK), amid a slowing economy, downstream buyers in Asian markets preferred to buy on a need-to basis and were reluctant to take any risks in a volatile market.

In China’s polyethylene (PE) market, there were limited deals concluded and the ample availability of competitively-priced import cargoes dragged down prices in the local market.

Distributors, having cut their offers in tandem with the softer pricing policy from local producers, lacked confidence in the outlook, as expectations of a demand uptick in November ahead of the Lunar New Year in January 2020 did not materialize.

Last week, hopes emerged that the US-China trade optimism was releasing its shackles on global markets.

The US president released comments that there were no rollbacks planned for the tariffs imposed on China, leaving the oil markets to reel in the disappointment as the likelihood of striking a new trade deal with China eased.

Reflecting a slowing Chinese economy, China sold 2.28m units of vehicles in October, down 4% from the previous corresponding period, according to the China Association of Automobile Manufacturers (CAAM).

Total sales in January-October declined 9.7% year on year to 20.65m units, according to the China Association of Automobile Manufacturers, the CAAM data showed.

Additional reporting Clive Ong, Samuel Wong, Helen Yan, Helen Lee, Judith Wang, Angie Li and Fanny Zhang

Focus article by Felicia Loo