Asian plastic prices rebound but pandemic limits demand support for most markets

SINGAPORE (ICIS)–Granted some petrochemicals saw price rebounds in recent days, with the rising price curve suggesting restocking activities, the trend may not be sustainable as fundamentally weak demand persists in an age of pandemic and as prospects of the world economy in a deep recession heighten.

Until a vaccine is proven to fight the novel coronavirus squarely, any return to business normalcy is unlikely to be conceivable and that means the plastic markets will continue to face headwinds.

Prices for Asian polypropylene (PP) fibre, the key chemical used to make surgical masks and personal protective gears and other medical equipment were initially shored up last week amid increased global demand, prompting a large number of Chinese producers to churn out PP fibre instead.

Non-woven fabrics, used to manufacture medical products such as masks and protective suits, account for around 70% of PP fibre demand.

In the Chinese domestic market, spot PP prices had surged previously, driven by demand for protective items and rapid price increase in near-month futures contract as well as lower polyolefin inventories held by both Sinopec and PetroChina at 945,000 tonnes on 10 April.

On 13 April, spot PP yarn prices in east China closed at yuan (CNY) 9,000/tonne, up by around 48% from end-March; while those in the futures market settled at CNY7,218/tonne, up by around 26% over the same period.

This, together with more maintenance and unexpected shutdowns of domestic units, had propelled domestic suppliers to raise ex-works (EXW) offers aggressively.

Meanwhile, China’s arbitrage window for PP imports was wide open following sharp spikes in domestic prices of the polymer.

The theoretical margins for PP imports were assessed in the week ended on 10 April at $139.04/tonne, more than triple the level in the previous week, according to ICIS data.

A spillover effect was reflected in spot propylene prices in northeast Asia that bucked the recent downtrend to register a slight gain on average late last week, drawing support from a strong performing downstream PP market in domestic China, though other struggling downstream markets curtailed the uptrend to a certain extent.

China’s propylene prices in Shandong jumped by 35% or CNY2,075/tonne from 10 April to CNY8,000/tonne on 11-12 April, underpinned by soaring prices for downstream PP fibers, particularly on 10 April.

However, China’s PP futures plunged at diversified degrees on Wednesday on bearish sentiment and falling speculation activities.

The September 2020 contract, the most actively traded PP futures contract at Dalian Commodity Exchange (DCE), closed at CNY6,677/tonne on 15 April, down by CNY192/tonne from the previous day’s settlement.

China’s PP market may fall during the end of this week given that the Chinese government has made stricter supervision on the PP fibre supply, a move that led to the plunge in PP futures and spot PP market the last two days.

In fact, spot traders have begun to shave off PP offers, selling cargoes at cheaper prices to cut losses as reflected in the price curve below.

2-EH/DOTP
Nonetheless, other chemicals are on the upward trend as supported by stronger feedstock prices.

East Asian’s spot prices for 2-ethylhexanol (2-EH) spot prices were higher so far on Thursday, with a spot deal at about $740/tonne CFR (cost and freight) east Asia – some $40/tonne higher compared with the assessed high end on 9 April.

Spot prices were tracking higher domestic prices in China as well as a strong performing feedstock propylene, though buyers said demand is fundamentally weak and the uptick in prices is not sustainable.

Dioctyl terephthalate (DOTP) spot prices in China also increased on Thursday, with a deal at $830/tonne CFR China, up $30/tonne versus the assessed high end on 9 April.

Some buyers returned to the import market after they saw higher domestic prices for both DOTP and upstream 2-EH.

PE PIPE GRADE
China’s domestic polyethylene (PE) pipe grade prices surged but demand support was lacking.

Natural 100 pipe grade resins were heard at around CNY8,000/tonne EXW, a sharp increase from CNY7,000-7,200/tonne EXW in the previous week.

Some discussions went up to CNY8,400/tonne EXW while transactions that occurred at that price were limited.

The steep increase was led by bullish sentiment from the surges of China domestic prices for other polyolefin resins used in the production of masks that are in high demand due to the pandemic.

Demand fundamentals for pipe grade resin had limited changes with market players noting only slight month-on-month improvement in April demand.

BENZENE
Asia’s benzene market remained firm, supported by gains in China’s domestic market, where suppliers have been revising up offers, building on the momentum last week.

A recovery in the US benzene market is boosting hope among some traders that Asia may have further upside potential in the near term.

Spot prices in Asia rose to around $330/tonne FOB (free on board) Korea, from under $250/tonne FOB Korea in early April.

In east China, spot domestic prices for prompt parcels rose to around CNY3,500/tonne ex-tank from CNY2,400/tonne ex-tank in early April, ICIS data showed.

China has attempted to kickstart its economy after restrictions during lockdown have eased as the coronavirus contagion – which started in the central city of Wuhan in December 2019 – appeared to have come under control.

Benzene is used to produce a number of intermediates that are used to create polymers, solvents and detergents.

CAPROLACTAM
Asian caprolactam markets have seen their first increase since early February, on the back of increasing benzene values.

Producers increased offers in a bid to recoup losses from the past two months.

While most buyers remained cautious on continuously weak downstream nylon markets, the market saw an uptick in discussions as some buyers showed interest in May and June arrivals.

Current offers are at $1,000-1,010/tonne CFR NE (northeast) Asia.

Prices were last assessed on 8 April at $850-890/tonne CFR NE Asia, ICIS data showed.

PHENOL/ACETONE
China’s import phenol prices rebounded last week, on the back of sharp increases in feedstock crude and benzene prices.

Cargoes subject to 5.5% import duty were offered at $580-600/tonne CFR CMP (China Main Ports) in the first half of last week.

Subsequently, separate cargoes subject to 5.5% import duty were offered at $650/tonne CFR CMP.

By 9 April, a non-dutiable cargo of 2,000 tonnes transacted at $680/tonne CFR CMP, for end April or early May loading.

In the week ended 3 April, prices were assessed at $530-580/tonne CFR CMP, down by $120/tonne week on week, plunging to the lowest level seen since the quote was launched in May 2014.

China’s import acetone market sentiment strengthened last week, following a two-week downtrend, on the back of support from the upstream and derivative isopropanol (IPA) markets.

Offers from northeast Asia were heard at $550-580/tonne CFR CMP, while most buying indications were at $500-530/tonne CFR CMP, with IPA producers’ indications at the high end.

In the week ended 3 April, prices were assessed at $430-490/tonne CFR CMP, at a near six-month low.

BPA
On Asia bisphenol A (BPA), northeast Asia-origin cargoes fetched levels at around $920/tonne CFR China for late-April delivery, moving up from $880-900/tonne CFR China in the week ended 10 April.

Gains in feedstock phenol prices in China, along with BPA Chinese domestic prices lifted market sentiment, amid a pick-up in restocking activity.

Selling indications for similar northeast Asia-origin spot material, with limitations on spot availability for some suppliers were at $950/tonne CFR China and above.

Regional producers are mostly keeping plant operating rates at below full capacity to mitigate margins being squeezed.

However, market sentiment was optimistically cautious amid China’s true recovery anticipated to take a while to materialize with global fuel demand dampened by the coronavirus pandemic.

MIXED XYLENES
China’s isomer-grade mixed xylenes (MX) import market saw a massive 9.41% gain on 13 April following reviving demand from the gasoline blending sector, as gasoline consumption was boosted by the nationwide business recovery.

Additional reporting by Queena Qu, Alex Feng, Aviva Hu, Joson Ng, Doris He, Clive Ong, Angeline Soh, Hazel Goh, Zhi Xuan Ho, Keven Zhang and Melanie Wee

Photo: Aerial photo taken on 12 April 2020 shows a view of the Yangluo Port in Wuhan in China’s central Hubei province. The novel coronavirus outbreak is believed to have emerged in Wuhan in late 2019. (By Xinhua/Shutterstock)

Focus article by Felicia Loo

($1 = CNY7.08)

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