Pandemic-driven demand for selected petrochemicals slowing down

Author: Pearl Bantillo

2020/09/25

SINGAPORE (ICIS)--Demand for selected petrochemicals which spiked in the first few months of the coronavirus pandemic has slowed down largely due to overbuying, with end-users now sitting on a pile of stocks.

Rubbing alcohol, hand sanitizers, plastic barriers and face masks became precious commodities for a time since the world started battling the deadly novel coronavirus pandemic.

This consequently drove up consumption of isopropanol (IPA); and methyl methacrylate (MMA), along with downstream polymethylmethacrylate (PMMA); and spun-bound and non-woven polypropylene (PP) grades.

Panic-buying has since died down as markets adjust to the new normal, about seven months into the health crisis.

MARKETS CALM DOWN
For IPA, which goes into rubbing alcohol and hand sanitizers, the pandemic-related demand boom had sent its spot prices surging 76% from early March to end-April.

Sentiment has now turned bearish as IPA’s major downstream packaging, construction and automotive sectors are wallowing in poor demand amid a global recession.

The share of IPA’s use as a disinfectant is too small - less than 10% in some counties - to drive the whole market.

For PMMA sheets that rose in popularity as an effective social-distancing tool to ward off infections at commercial spaces such as offices, shops and restaurants, demand has weakened in the third quarter.

China’s exports of the material have started to wane since July, partly because these plastic barriers are permanent and would not need replacement so soon.

“Previously buyers booked four months ahead, now people are less aggressive and book like two months ahead,” a source at an Asian cast sheet manufacturer said.

“Buyers in the US realized they have overbought, and there have been some cancellations,” he added.

Nonetheless, the producer is still fully booked up to the end of the year for protective sheets.

Reduced demand for these products may also have to do with 2020 drawing to a close soon and buyers in the US and Europe not inclined to stock up too much.

PMMA resins supply in Asia is snug due to a combination of plant turnarounds and tight availability of feedstock MMA.

High cost of feedstock acetone and the consequent poor margins are keeping production low at running MMA plants. Supply is also being constrained by a heavy turnaround season from August to November.

Some recovery in PMMA demand was observed in China amid peak manufacturing season, with downstream automotive sector showing more signs of life.

For non-woven, spunbond PP grades, used widely in the manufacture of face masks and other personal protective equipment (PPE), demand has tapered down in the second half as downstream manufacturing lines caught up to the increase in end-use consumption.

A sudden surge in demand for these grades immediately in the early months of the pandemic resulted in a price premium of more than $100/tonne over commodity flat yarn.

Demand for PP used in the food packaging sector has held relatively steady throughout the pandemic, as food take-outs and deliveries increased. High melt-index PP grades are used in the manufacture of thin-walled injection moulded containers.

ABS BUCKS TREND ON STRONG HOME APPLIANCE DEMAND
Acrylonitrile butadiene styrene (ABS), on the other hand, continued to enjoy sturdy demand since the start of the year on strong purchases of appliances - its main downstream - amid the pandemic-induced global lockdowns.

ICIS analyst Jimmy Zhang said 2020 is also “regarded as a renewal cycle” for the household industry, citing peak sales growth a decade ago.

ABS demand is expected to remain robust for the rest of the year amid peak manufacturing season in China, with supply relatively snug.

Despite gradual lifting of some restrictions on businesses and people movement, work-from-home for most employees has become the norm, which is expected to last until the end of the year.

Fear of infection will continue to keep a huge swathe of the global population at their homes, which will likely remain stocked up with essentials for maintaining personal hygiene, as the global coronavirus tally continue to surge and vaccines remain at various trial stages.

The outbreak is believed to have started in Wuhan, China late last year. Confirmed cases across the world now stand at nearly 32m, with about a million deaths.

(Recasts paragraph 10 for clarity)

Focus article by Pearl Bantillo

Additional reporting by Li Li Chng, Yuanlin Koh, Leanne Tan and Julia Tan

Photo: Face masks and shields on display during the 28th Guangzhou Fair in south China's Guangdong Province - 28 August 2020. (Source: Xinhua/Shutterstock)

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