China petrochemical markets gain in active post-holiday trade

Author: Yvonne Shi

2020/10/14

SINGAPORE (ICIS)--China's domestic petrochemical markets are registering strong post-holiday gains on the back of tightened supply and robust restocking demand.

On October 13, the ICIS China Petrochemical Index rose 2.9% from end-September to 939.94, the highest number recorded since April.

The index is based on weighted average prices of 17 major chemical products in selected local markets.

Firm demand was fueling the price spike in the likes of styrene after China’s Mid-Autumn and National Day holidays on 1-8 October, while inventory at ports are falling.

SM imports are expected to slump in October to November on thin margins as cheaper supply is available in the domestic market.

Strong offtakes by traders and end-users should continue to lower inventory at ports.

For some, tight availability due to reduced imports pushes up domestic prices.

For methyl methacrylate (MMA), supply is scarce amid a global shortage in the face of restocking, while for bisphenol-A (BPA), import availability is affected by an ongoing turnaround at a South Korean plant.

Downstream buyers of BPA had held off purchases, causing a surge in pent-up demand after the holiday.

For phenol, strong demand was driving up the market, with supply constrained by a delay in the restart of Zhejiang Petrochemical's plant.

In the 2-ethylhexanol (2-EH), acrylic acid and esters markets, supplies are expected to be curbed by scheduled plant turnarounds.

For some products like propylene oxide (PO), strong demand was pushing up prices despite ample supply.

Ethylene glycol prices have soared on reduced imports and better end-demand as exhibited by declining stockpiles in the polyester chain after the long holiday.

China’s petrochemical futures posted gains since trading resumed on 9 October, which boosted sentiment in the spot polyethylene (PE), polypropylene (PP) and methanol markets.

China futures markets' closing prices (in CNY/tonne)

Product 30-Sep 13-Oct % change
PP* 7629 7887 3.38%
LLDPE* 7140 7415 3.85%
Methanol^ 1,917 2,036 6.21%

Sources: Dalian Commodity Exchange* (DCE) and Zhengzhou Commodity Exchange^ (ZCE)

Polyester staple fiber futures contract on 12 October surged 8%, hitting the maximum daily movement on its first day of trade at the Zhengzhou Commodity Exchange. This, in turn, boosted the upstream monoethylene glycol (MEG) market.

Industry players expect general active trading in the commodity futures markets throughout October, in the lead-up to a key government meeting that will set China’s economic policies for the next five years.

The Communist Party of China (CPC) Central Committee will hold its fifth plenary session late this month to deliberate on the 14th five-year plan (2021-2025).

Analysis by Yvonne Shi

($1 = CNY6.74)

Photo: Aerial view of container vessels at the Yangshan Port in Shanghai, China on 29 July 2020. (Source: Shutterstock)

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