TOPIC PAGE: Coronavirus, oil price crash – impact on chemicals

Author: Will Beacham

2020/09/29

China’s styrene butadiene rubber (SBR) imports have slowed ahead of the country’s long holiday in October, while demand for November cargoes may wane amid an unclear outlook.

Amid higher SBR offers, downstream tyre makers in the country are likely to hold back their November purchases as there could be a potential downside to prices from new BD supply, market sources said.

Three crackers started up in China in the third quarter, with a total combined BD capacity of 360,000 tonnes/year.

BD is a raw material for the production of SBR, which goes into tyres for the automotive industry.

China is the world’s largest automotive market and a major consumer of SBR.

China’s manufacturing sector continued the expansion momentum, with official purchasing managers’ index (PMI) surged to 51.5 in September from 51.0 in the previous month, according to the National Bureau of Statistics (NBS).

Despite the improvement in overall demand, there exists imbalance among industries. Sectors such as textile and clothing still face weak demand, while high-end manufacturing also sees lackluster demand recovery, the NBS said.

China is expected to avoid a recession. A forecast growth of 2% for the world’s second-biggest economy helped pull up the overall average for the region into positive territory.

On this topic page we analyse the impact of coronavirus and the oil price collapse on chemical markets and bring together the latest news reported by ICIS. To visit the ICIS energy markets topic page, click here

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LATEST HEADLINES

China SBR imports slow down ahead of October holidays
By Helen Yan 2020/09/30 SINGAPORE (ICIS)--China’s styrene butadiene rubber (SBR) imports have slowed ahead of the country’s long holiday in October, while demand for November cargoes may wane amid an unclear outlook.

Asia MTBE supply-demand imbalance to remain amid slow demand recovery
By Keven Zhang 2020/09/29 SINGAPORE (ICIS)--Asia’s methyl tertiary butyl ether (MTBE) outlook appears bearish, with slow demand and long supply expected to continue and will likely maintain in relatively close correlation with the gasoline and crude oil markets in the near term.

Developing East Asia and Pacific 2020 GDP growth to slow to 0.9%
By Nurluqman Suratman 2020/09/29 SINGAPORE (ICIS)--Economic growth in developing East Asia and the Pacific region is expected to slow down this year to 0.9%, the slowest pace since 1967, weighed down by the coronavirus pandemic and efforts to contain its spread, the World Bank said late on Monday.

PODCAST: China recovery may be on shaky foundations
By: Will Beacham 2020/09/28 BARCELONA (ICIS)--China’s economic recovery may be frail as it relies on surging exports rather than fragile domestic demand.

  • China’s economic bounce back may be on shaky foundations
  • China market sentiment, prices influence developing economies
  • Pandemic impact on emerging economies could hurt global polymer growth
  • Turkey and Africa polyethylene (PE) and polypropylene (PP) markets steered by China
  • Risk of global depression, social unrest with imposition of more strict lockdowns

Listen to this podcast interview with Paul Hodges chairman, International eChem and author of the pH Report; John Richardson ICIS senior consultant, Asia and ICIS Insight editor, Nigel Davis. This week's special guest is Ben Lake, markets editor for Africa and Turkey PE and PP.

Click on the headline to hear the podcast.

With China's economy on a roll, domestic petchem demand brightens up
By Felicia Loo 2020/09/28 SINGAPORE (ICIS)--While major world economies are still struggling with the coronavirus pandemic that has bruised their economies, China is on the fast lane to recovery, supported by Beijing’s stimulus measures.

Europe PE flat as US FOB soars, arbitrage opportunities appear
By: Linda Naylor 2020/09/25 LONDON (ICIS)--European polyethylene (PE) prices are flat, if not slightly down in some cases, but prices on a free-on-board (FOB) basis in the US are soaring, standing sometimes higher than delivered prices in Europe.

US prices have been rising for several months now and sellers are shying away from low-priced Europe to sell to Latin America, where netbacks are better.

Offers of $1,000/tonne FOB US Gulf were heard for C4 (butene based) linear low density polyethylene (LLDPE), a number that would mean delivered prices, duties included, in Europe of €950/tonne. Current levels are easily €100/tonne below this.

September demand has been disappointing for many sellers in Europe, hence the lacklustre pricing situation, and the mood is affected by increasing coronavirus numbers, making demand for the fourth quarter hard to gauge.

Pandemic-driven demand for selected petrochemicals slowing down
By 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.

China’s Sinopec Zhongke raises refinery operating rate to 70%
By Fanny Zhang 2020/09/25 SINGAPORE (ICIS)--China’s Sinopec Zhongke Refining and Petrochemical has ramped up production at its new 200,000 bbl/day refinery at Zhanjiang in Guangdong province to around 70% of capacity, a company source said.

PODCAST: Asia Special Report – China MMA
By Olivia Dai 2020/09/25 SINGAPORE (ICIS)--China’s methyl methacrylate (MMA) prices surged in September although feedstock acetone prices fell and new MMA products entered the market.

Total to produce sugar-based PLA at Grandpuits, to quit crude refining in Q1

By: Jonathan Lopez 2020/09/24 LONDON (ICIS0--Total will quit processing crude oil at its Grandpuits refinery and convert it into a ‘zero-crude platform’ for the production of sugar-based polylactic acid (PLA) and biofuels, the French energy and petrochemicals major said on Thursday.

The overhaul, with expected capital expenditure (capex) at €500m, will also include a chemicals recycling unit, said Total.

The facility will, in part, be powered by solar energy-generated electricity.

The PLA unit will be a 50/50 joint venture with Corbion; the two have already worked together at a PLA plant project in Thailand.

The plant, which is expected to start up in 2024, will have a production capacity of 100,000 tonnes/year of PLA, a thermoplastic used in film wrap as well as some industrial applications. Demand is growing 15% annually, according to Total.

China BDO extends gains in September on tight supply, strong demand
By Jady Ma 2020/09/24 SINGAPORE (ICIS)--China's domestic butanediol (BDO) prices have risen for the second straight month in September on the back of tight supply and strong demand.

Spot prices of bulk BDO cargoes in east China were assessed on 22 September at around yuan (CNY) 8,450/tonne DEL (delivered), up by around 12% from early August, ICIS data showed.

ACC urges US to remove tariffs on chems, plastics that fight Covid
By Al Greenwood 2020/09/23 HOUSTON (ICIS)--The American Chemistry Council (ACC) urged the US to provide some kind of relief from the tariffs the nation has imposed on chemicals and plastics that are used to fight the coronavirus, arguing that it would help ensure access to these critical materials.

Eurozone business activity stalls, manufacturing picks up steam
By: Morgan Condon 2020/09/23 LONDON (ICIS)-- The eurozone's business sector stagnated in September as a struggling services sector outweighed a recovery in the region's manufacturing industry, according to the latest data released on Wednesday.

September’s flash composite purchasing manager’s index (PMI) reading fell to 50.1 from 51.9 in August and a three-month low, according to the release from IHS Markit.

This shows that eurozone rounded off the third quarter losing momentum with minimal growth, marginally missing the 50.0 neutral reading.

Manufacturing continued at a stronger pace than it has in recent years, with the flash sector PMI jumping to 53.7 reaching a 25-month high up from 51.7 the previous month.

PODCAST: Europe refineries, petrochemicals may close as demand fails to recover
By: Will Beacham 2020/09/21 BARCELONA (ICIS)--Refineries and downstream petrochemicals plants in Europe could close in the next 12-18 months, as demand for transport fuels fails to recover.

  • 1-2 refineries may close in Amsterdam-Rotterdam-Antwerp (ARA) region in next 12-18 months through lack of demand for transport fuels
  • Downstream chemical plants will also close
  • Switch to electric and autonomous vehicles will drive changes in the chemicals mix
  • China could become global leader in plastics recycling in 5-10 years
  • China’s demand for chemicals imports will fall if recycling takes off

China’s acetone prices slump as pre-holiday buying wanes
By Yoyo Liu 2020/09/23 SINGAPORE (ICIS)--China’s acetone prices slumped, amid the slowdown of restocking activities prior to the National Day holiday on 1-8 October. Weak buying sentiment and bearish supply-demand expectations may further weigh on the market.

Asia PBT under pressure as demand eases ahead of China holiday
By Clive Ong 2020/09/23 SINGAPORE (ICIS)--Asia’s polybutylene terephthalate (PBT) resins prices were under downward pressure this week as demand eased further ahead of China’s week-long holiday in October.

China aims to become carbon neutral by 2060; hit peak emissions before 2030
By Fanny Zhang 2020/09/23 SINGAPORE (ICIS)--China will aim for carbon neutrality by 2060 and hit peak emissions before 2030, President Xi Jinping told the United Nations (UN) General Assembly.

BASF to cut up to 2,000 jobs in global business services unit
By Stefan Baumgarten 2020/09/22 LONDON (ICIS)--BASF expects to reduce the headcount in its Global Business Services unit by up to 2,000 worldwide by the end of 2022.

Asia MEG prices soften on new supply
By Judith Wang 2020/09/22 SINGAPORE (ICIS)-- Asia monoethylene glycol (MEG) spot discussions fell for a fifth day, after prices hit a six-month high in early September, as the start-up of new plants in China weighed on market sentiment.

Saudi Industrial Investment Group, Petrochem start merger talks
By Nurluqman Suratman 2020/09/21 SINGAPORE (ICIS)--The Saudi Industrial Investment Group (SIIG) and Saudi Arabia’s National Petrochemical Co (Petrochem) have started talks over a potential merger, reviving a plan conceived nine years ago.

Asia isomer-grade MX hits six-month high on firm demand, snug supply
By Keven Zhang 2020/09/21 SINGAPORE (ICIS)--Asia’s isomer-grade mixed xylenes (MX) prices climbed to a six-month high amid firmer demand from downstream markets and snug supplies in the region.

NE Asia C3 import talks take a back seat amid China re-stocking
By Jude Chan 2020/09/18 SINGAPORE (ICIS)--Import deals and discussions slowed to a crawl in the northeast Asian propylene (C3) market, as buyers in China turned to the domestic market for prompt cargoes to replenish their inventories before the country’s week-long holiday at the start of October.

S Korea aromatics output to take hits as refiners eye Oct run-rate cuts
By Nurluqman Suratman 2020/09/18 SINGAPORE (ICIS)--South Korea's production of aromatics may be affected as domestic refineries mull cutting run rates further in October on poor margins amid sluggish demand.

INSIGHT: Asia's key petrochemical markets expect supply to pile up in Q4
By Felicia Loo 2020/09/18 SINGAPORE (ICIS)--The year 2020 has been roasted by the pandemic hitherto, with the petrochemical outlook for the fourth quarter being no exception as supply exceeding demand expected to be the case for major products.

Dow boosts Q3 profit outlook on packaging, durables, personal care
By Joseph Chang 2020/17/09 NEW YORK (ICIS)--US-based Dow expects Q3 earnings to come in better than previously forecast on improving key end markets and polyethylene (PE) dynamics, the chief financial officer said on Thursday.

Asia benzene buoyed by firm crude; arbitrage window to US still shut
By Clive Ong 17-Sep-20 13:19 SINGAPORE (ICIS)--Asia’s benzene market was bolstered by firm crude oil futures, following US offshore production shutdowns from Hurricane Sally. The uptick in benzene prices, however, appeared to be still tempered by ample availability in Asia.

New projects to boost China’s light olefins imports in 2021-2022
By Lillian Ren 17-Sep-20 14:29 SINGAPORE (ICIS)--China is expected to see a major rise in imports of light olefins -  propane/butane and ethane - in 2021 and 2022 to meet new demand driven by start-up of propane dehydrogenation (PDH) and steam cracker projects. China will need to import 5.04m tonnes and 8.47m tonnes of LPG/ethane in 2021 and 2022 for those new capacities, respectively, though part of the demand will be met by domestically produced feedstock.

EU chemicals exports to continue to be hit by emerging economies setback
By: Nigel Davis 2020/09/16 LONDON (ICIS)--EU chemicals trade has shrunk this year as the coronavirus pandemic has spread and lockdowns have restricted industrial activity and consumer goods demand.

Trade is vitally important for the sector which has enjoyed a strong trade balance over the years. Chemicals has benefited hugely from globalisation and from broad-based tariff reductions.

A key question is how the pandemic will impact trade over the longer term.

Through lockdowns, local production for local supply was of vital importance. Producers worked hard to supply and work with customers as best they could, but long trade routes came under particular pressure.

China EPDM demand slows down ahead of week-long October holiday
By Helen Yan 2020/09/16 SINGAPORE (ICIS)--China’s demand for ethylene propylene diene monomer (EPDM) has started to slow down as buyers have mostly completed procurements ahead of the country’s week-long holiday in October.

Asia MTBE to be buoyed by arbitrage flows, supply cutback
By Keven Zhang 2020/09/16 SINGAPORE (ICIS)--Asia's methyl tertiary butyl ether (MTBE) prices were supported by stronger demand as buyers were attracted to low prices, while the near-term market is expected to stay buoyed by arbitrage flows and supply disruption.

India August exports fall 12.7%; imports down 26%
By Pearl Bantillo 2020/09/16 SINGAPORE (ICIS)--India’s total exports extended their double-digit declines, falling 12.7% year on year in August to $22.7bn, while imports fell a steeper 26.0% to $29.5bn, official data showed.

Crude demand on ‘treacherous’ path to recovery due to transport, remote working - IEA
By: Jonathan Lopez 2020/09/15 LONDON (ICIS)--The recovery in crude oil demand is on a “treacherous” path as a resurgent coronavirus pandemic in Europe and India, among other places, keeps transport in the doldrums, the International Energy Agency (IEA) said on Tuesday.

With infections rising in Europe again, working remotely remains commonplace. This has resulted in a sharp reduction in demand for energy and transport, with the aviation sector taking the largest hit as travel has fallen dramatically this year.

The IEA’s Oil Market Report on Tuesday reduced its estimate for crude oil demand in the second half of 2020 by 400,000 bbl/day, and forecast that average demand for 2020 will be 91.7m bbl/day - a level not seen since 2013.

German economy improves in September but banking remains a concern - Zew
By: Morgan Condon 2020/09/15 LONDON (ICIS)--The German economy has continued to improve in September despite some worrying indicators, economic research group Zew said on Tuesday.

The Zew Indicator of Economic Sentiment for Germany rose 5.9 points in September, month on month, to 77.4 points.

“Stalled Brexit talks and rising coronavirus cases could not dampen the positive mood," said Zew president Achim Wambach.

"However, the still negative outlook for the banking sector reveals fears of a rising number of loan defaults in the coming six months.”

Developing Asia GDP to contract in 2020, first recession in almost six decades – ADB
By Nurluqman Suratman 2020/09/15 SINGAPORE (ICIS)--Economic prospects in developing Asia have worsened amid a revival of coronavirus cases in some areas, with regional GDP expected to contract by 0.7% this year, the Asian Development Bank (ADB) said on Tuesday.

Asian ECH firm, but sentiment may shift on impending restarts
By Ai Teng Lim 2020/09/15 SINGAPORE (ICIS)--Asian spot discussions for epichlorohydrin (ECH) continued to edge up this week, supported by ongoing tightness in prompt supplies.

However, the bullish sentiment seems to have started to waver somewhat, market sources said, now that several regional plant maintenance are wrapping up, which could turn the supply situation around.

PODCAST: Why ‘peak oil’ may coincide with ‘peak plastic’
By: Will Beacham 2020/09/14 BARCELONA (ICIS)--BP’s new energy review suggests the world is heading for ‘peak oil’ while the same trends may mean we have also reached ‘peak plastic’.

  • 'Peak oil' may coincide with 'peak plastic' as circular economy undermines demand for virgin petrochemicals
  • Lower oil production will impact availability of chemical feedstock
  • Expect shift to renewables to impact chemicals demand from automotive
  • Why China’s new five year plan meeting is as important as the US elections
  • Lockdowns are not the best way out of the pandemic

Click on the headline to hear the podcast.

INSIGHT: Chemicals demand for crude to fall as energy transition takes hold
By Nigel Davis 2020/09/14 LONDON (ICIS)--This is BP’s latest view of how demand for oil as a feedstock for plastics and man-made fibres will develop over time.

The UK oil major on Monday released its latest Energy Outlook which has raised the question among commentators of ‘peak oil’ and how oil demand might not recover to pre-coronavirus pandemic levels.

The outlook presents some of the detail in thinking behind BP’s transformation into a much more customer-focused international energy company.

It is the detail that is informing current strategy, which includes a 40% reduction in oil and gas production.

Source: BP Energy Review 2020

Eurozone chemicals output up slightly in July, industrial recovery shows ‘signs of fatigue’
By: Jonathan Lopez 2020/09/14 LONDON (ICIS)--Chemicals output in the eurozone rose slightly more than 1% in July, month on month, a lower increase than average industrial production levels, the EU’s statistical office Eurostat said on Monday.

In the wider 27-country EU, chemicals output also rose slightly more than 1%.

These modest increases compared with more than 4% increase in industrial production in both the EU and the eurozone.

However, the increase was not enough yet to compensate for falls in output during the second quarter amid lockdowns.

Asia butac/etac prices near six-month highs on supply constraints
By Melanie Wee 2020/09/14 SINGAPORE (ICIS)--Asia’s butyl acetate (butac) prices touched a near six-month high, buoyed by supply constraints in China amid plant maintenance, with an expected uptick in demand set to liven up the market.

VIDEO: China melamine market subdued; demand may pick up from H2 Sept
By Joson Ng 2020/09/14 SINGAPORE (ICIS)--Watch ICIS editor Joson Ng discuss the latest developments in the Chinese melamine market.

Asian MMA firmer after 8 weeks; heavy turnarounds to support
By Li Li Chng 2020/09/14 SINGAPORE (ICIS)--Asia’s methyl methacrylate (MMA) spot prices rose for the first time after holding stable for eight weeks, due to tight supply, firmer feedstock and improved sentiment, tracking a bullish China domestic market.

The heavy turnaround period in Asia from August to November will likely provide support to the market.

In the week ended 11 September, MMA prices for bulk parcels of 500 tonnes and above were at $1,380-1,420/tonne CFR (cost & freight) southeast (SE) Asia, up $20/tonne from the previous week, according to ICIS data.

ANALYSIS AND RESOURCES

June 2020 Coronavirus presentation given by ICIS Analytics experts.