Asian chemicals face tight supply, weak demand post-Lunar New Year

SINGAPORE (ICIS)–The outlook on Asian petrochemicals and fuel products is mixed post-Lunar New Year, with supply of butadiene (BD), acrylonitrile (ACN) and isopropanol (IPA) tightening while other chemicals will face weak demand and rising fuel supply is expected.

On Asian BD, cargo availabilities may be tighter than expected in the first quarter as deep-sea material from Europe is being diverted to the US due to logistical issues in the US supply chain in the wake of the force majeure declared on TPC’s production facility in Port Neches, Texas.

The Port Neches fire started on 27 November and lasted for nearly a week, suspending production at the site.

The two lines there have a total BD capacity of 426,000 tonnes/year, according to the ICIS Supply & Demand Database.

China is a major importer of BD. Its BD imports reached 206,100 tonnes in January-October 2019, down by 17.7% from 250,500 tonnes recorded in the same period of last year, according to ICIS Supply and Demand Database.

Meanwhile, China’s synthetic rubber market is expected to face tight supply in the first quarter due to a spate of BD maintenance works in Asia, which would offset the impact of new BD capacities from Zhejiang Petrochemical and Hengli Petrochemical that totaled 340,000 tonnes/year.

Tighter supply is also mirrored in the Asian isopropanol (IPA) market and the feedstock itself is also constricted post-Lunar New Year, and supply is expected to be lower from turnarounds scheduled in the first quarter.

The Lunar New Year, which falls on 25 January, is celebrated in most parts of northeast and southeast Asia. China will be on holiday for a full week from 24 January.

On acrylonitrile (ACN), February-loading supply is seen tight partly due to an upcoming turnaround in Taiwan while a plant has just recently restarted in Thailand.

China, which is a net ACN importer, is recently active in export discussions as domestic availability has improved following restarts of major facilities in January.

Meanwhile, demand is seen dim in other chemical markets.

China’s mixed xylenes (MX) consumption would remain weak until the end of February amid ample supply.

Some downstream painting plants (small to medium enterprises), along with paraxylene (PX) industries, had shut down, curbing demand as a result.

Fuhaichuang shut its PX units on 12 December and Hainan Refinery shut its 1m tonne/year Phase 2 PX unit on 16 January; the closure of the units led to a reduction of about 140,000 tonnes of MX consumption.

Fuhaichuang and Hainan Refinery do not plan to restart the PX units until the end of February, coinciding with the traditional lull season of gasoline in February, when MX demand from blenders is also lower.

Meanwhile, inventories at Chinese ports are likely to accumulate during the Lunar New Year holiday, reinforcing the notion of a weak market.

Similarly, Asian isomer-grade MX demand is expected to stay soft after the upcoming Lunar New year following limited activities ahead of the holiday.

On the fuel markets, China’s Shandong refiners will face high gasoil and gasoline inventories due to ongoing production during the week-long holiday.

Even after the holiday, trading activities and transportation will resume gradually and slowly.

Meanwhile, Zhejiang Petrochemical has achieved massive production of gasoil and gasoline, signaling that domestic supply pressure is likely to increase further after the holiday.

On 15 January, the total inventories of refined oil products of Shandong independent refiners fell by 51,000 tonnes or 6.9% from 29 December to around 680,000 tonnes.

Focus article by Felicia Loo

Additional reporting by Helen Yan, Li Li Chng, Yuanlin Koh, Aviva Hu, Veronica Zhang, Keven Zhang and Yiting Tang

Photo: Chinese lanterns to welcome the Lunar New Year in Jakarta, Indonesia. (By Tatan Syuflana/AP/Shutterstock)