Asian petchem shares, crude oil extend gains on US stimulus

Author: Nurluqman Suratman

2020/03/25

SINGAPORE (ICIS)--Asian petrochemical shares rallied while crude extended recent gains on Wednesday after US leaders agreed on a fresh $2tr stimulus package aimed at softening the blow of the coronavirus pandemic.

At 06:00 GMT, Asian stock markets were all in the green, with Japan's Nikkei 225 Index up by 7.00% and the Hang Seng Index in Hong Kong 2.64% higher.

South Korea’s SK Innovation led petrochemical gainers, surging 23.6% while Japan’s Asahi Kasei Corp was up by 9.33%.

China's Sinopec Shanghai Petrochemical Co was up by 4% in Hong Kong while Taiwan’s Formosa Petrochemical Corp was 1.42% higher.

US senate leaders reached a deal for the stimulus package - the largest in the country’s history - on Wednesday to combat the coronavirus-induced economic slowdown and to halt the heavy bleeding across the financial markets.

Company/Stock Exchange % Change
Nikkei 225 (Japan) 7.00%
Asahi Kasei Corporation 9.33%
JXTG Holdings, Inc. 5.34%
Mitsubishi Chemical Holdings Corporation 6.19%
Mitsui Chemicals, Inc. 6.36%
Hang Seng Index (Hong Kong) 2.64%
Sinopec Shanghai Petrochemical 4.00%
PetroChina Company Limited 4.90%
KOSPI Composite Index (South Korea) 4.41%
OCI Company Ltd 8.62%
SK Innovation Co., Ltd. 23.61%
LG Chem, Ltd. 6.25%
Lotte Chemical Corporation 9.06%
Hanwha Corporation 7.81%
TSEC weighted index (Taiwan) 3.87%
Formosa Petrochemical Corporation 1.42%
Nan Ya Plastics Corporation 7.74%
Formosa Chemicals & Fibre Corporation 5.06%
STI Index (Singapore) 3.35%
Wilmar International Limited 3.64%
Olam International Limited 0.71%
FTSE Bursa Malaysia KLCI (Malaysia) 3.27%
SSE Composite Index (Shanghai, China) 2.14%
Stock Exchange of Thailand SET Index 3.99%
PTT Global Chemical 9.80%
Indorama Ventures 5.81%
IRPC 5.00%
The Siam Cement 6.92%
Thai Oil 5.31%

Indonesia’s financial markets are closed on Wednesday for the Saka New Year holiday.

Overnight, US-listed shares of chemical companies rose as the Dow Jones Industrial Average increased by more than 11%. The broader S&P 500 surged more than 9%, the biggest single session rally since October 2008.

$/bbl (As of 06:30 GMT) Last price % Change Net Change Close Session high Session low
Brent 27.88 2.69% 0.73 27.15 28.29 27.52
US WTI 24.89 3.67% 0.88 24.01 25.24 24.2

Oil prices tracked the rally in financial markets, rising more than $1/bbl earlier on Wednesday, on hopes that the latest stimulus measures introduced in the US and elsewhere in the world will help boost energy demand amid fears of a global recession.

Fears of further demand destruction placed a lid on crude gains, with India now on full lockdown and as confirmed coronavirus cases continued to climb globally. Oil prices are still well below levels seen at the start of the year.

The Economist Intelligence Unit in a note on Wednesday revised down its forecast for Brent crude oil prices to an average of just over $32/barrel in 2020.

“This is a significant downgrade from our previous forecast, of $47/bbl, owing to a weaker than previously expected demand outlook amid a sharp slowdown in global economic activity,” it said.

ASIA PETROCHEMICAL MARKETS REMAIN DEPRESSED
Spot CFR (cost & freight) Japan naphtha prices for first-half May delivery averaged at $207.00/tonne at early hours session on Wednesday, rising by a modest $7.50/tonne from the preceding day’s close.

Asia naphtha prices have already fallen by 60% since the start of the year at above $500/tonne CFR Japan.

In the styrene butadiene rubber (SBR) market, a widening buy-sell price gap and cancellation of orders have further depressed the market, with outlook on demand weighed by the increase in lockdowns, border closures and port restrictions.

India imposed a 21-day lockdown starting from 25 March as to curb the spead of the coronavirus pandemic while Malaysia’s government imposed a two-week lockdown on the nation from 18 March.

In China, domestic ethylene oxide (EO) prices plunged for the first time since 6 November last year on weak downstream markets.

China’s 2-ethyl hexanol (2-EH) supply glut is likely to persist in the near term as downstream demand remains weak due to the slump in crude oil prices since the start of the year amid the coronavirus pandemic.

In the US on 24 March, US April nominations for butadiene (BD) are sharply lower.

Prices for US toluene and mixed xylenes (MX) fell below $1/gal, reaching 18-year lows.

In Europe, March spot prices for benzene fell by over 50% since Monday.

Country/Region Number of confirmed coronavirus cases (last updated 25 March)
China 81,591
Italy 69,176
US 55,041
Spain 42,058
Germany 32,991
Iran 24,811
France 22,633
Switzerland 9,877
South Korea 9,037
UK 8,164
Netherlands 5,585

Source: World Health Organisation, Center for Systems Science and Engineering (CSSE) at Johns Hopkins University (JHU)

Focus article by Nurluqman Suratman

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