Asia's petrochemical demand recovery in limbo amid easing of restrictions

Author: Felicia Loo

2020/06/23

SINGAPORE (ICIS)--Asia’s petrochemical demand recovery is likely to be in limbo despite countries easing restrictions on their lockdowns, amid a resurgence of the coronavirus in Beijing.

New cases in Beijing and a global record single-day increase of nearly 190,000 coronavirus cases on Sunday signaled a world economy sullen with gloomy data.

The Asian benzene market continue to face elevated inventories in China and with deep-sea lots set to continue arriving in China and Taiwan, supply is expected to remain ample in the region.

Some sellers concede that it has become difficult to move benzene cargoes in recent weeks, with many buyers not in a hurry to purchase.

Hit by weak downstream derivatives, Asian monoethylene glycol (MEG) faced tepid sales.

The downstream polyester sales slowed down and the polyester inventories have built up amid the lull seasonal demand, which prompted polyester producers to cut operations and subsequently hurt the procurement for feedstock MEG.

Buyers and end-users were not rushing to replenish cargoes amid ample availability as the MEG port inventories rose again with rising arrival of import cargoes and slowing off-take rates.

MEG producers are plagued by the eroded margins due to the rising crude futures and naphtha prices, and some producers in the region have cut or plan to cut operations.

On vinyl acetate monomer (VAM), liquidity remained thin as buyers largely hold inventory and did not show firm buying interest.

Also, the Indian and southeast Asian markets are just restarting their economies and demand from the downstream sectors including paint and coating,  adhesive and textile sectors remained slow.

Supply of VAM remained ample in Asia even as production has been reduced at several plants.

Southeast Asian maleic anhydride (MA) import offers are losing ground, as sellers sought to chase elusive deals with deeper discounts.

Contrary to earlier anticipations, there was no sign of any pent-up MA demand, after extensive coronavirus-linked restrictions around the region were eased and lifted in late May/June.

Sentiment is weighed down by several macro-level developments, chief of which is mounting fear of a possible second-wave coronavirus infection, especially after cases in Beijing spiked recently.

Asia's purified terephthalic acid (PTA) margins are under a downward pressure, and are expected to stay weak in the near term.

Inventories of PTA in China were building up since the start of the year, as demand was adversely impacted due to the coronavirus outbreak.

Outside of China, downstream polyester demand stayed weak, as export orders of textile and clothing to the West were curbed by prevailing weak global macroeconomic environment.

Additional reporting by Clive Ong, Judith Wang, Helen Lee, Ai Teng Lim and Samuel Wong

Focus article by Felicia Loo

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