Asia PE, benzene supply tight on firm demand, economic recovery

Author: Felicia Loo

2021/04/08

SINGAPORE (ICIS)--Asia’s supply of polyethylene (PE) and benzene is tight amid plant shutdowns among suppliers in the face of rising demand as the region’s pace of economic recovery strengthens.

The International Monetary Fund (IMF) upgraded the 2021 growth forecast for emerging and developing Asian economies to 8.6%, reflecting a stronger recovery than initially expected after lockdowns were eased in some large countries.

For southeast Asia, PE import supply is likely to remain tight for a few more weeks due to plant maintenance scheduled in April and May, particularly in Thailand.

In India, a major producer is also due to shut its low density polyethylene (LDPE) plant for maintenance in April.

Most other producers elsewhere in Asia, however, are not due for any shutdowns until mid-year.

"The import cargoes from the US might keep tight for [the] Asian market in April due to strong demand in the US, although more plants in the US resumed [production] from March," said ICIS senior analyst Amy Yu.

"Some of demand has been dented in the high-level PE offers, but the packaging film should enter into the peak season due to the mid-year retail sales promotions and holidays in Asia, like May Day Golden Week in China and Songkran Festival in Thailand," she added.

China will be on Labour Day holiday from 1-5 May, while Thailand will be on holiday on 13-15 April for the Songkran Festival, which marks the country’s New Year.

"The operating rate of plastic pipe processors will increase in Q2 with more construction works resuming also," Yu said.

In China, PE inventories remained high, prompting sellers to cut offers to boost sales, while the supply outlook was on the long side.

Some 800,000 tonne/year of new PE capacity in the country is scheduled for trial runs in Q2, Yu said.

These are Lianyungang Petrochemical’s new 400,000tonne/year high density PE (HDPE) plant and Heilongjiang Haiguo Longyou Petrochemical’s new 400,000 tonne/year linear low density PE (LLDPE)/HDPE swing plant.

"Tight supply will ease in China with new capacity scheduled to come on stream in Q2, while the supply in southeast Asia will remain tight," said Yu.

Scheduled turnarounds have reduced domestic PE supply in China.

Sinopec Maoming's LDPE units are currently undergoing maintenance in China, while its HDPE unit is shut for a turnaround that will last until early May.

Sinopec Yanshan's PE units are also shut for maintenance with restarts expected in mid-May.

China is a major importer of PE. At present, buying interest from end-users in China is sluggish due to high resin costs and downstream purchasing activities were likely to remain weak.

Trade in China was also dampened by signs of softening demand in the international market amid a possibly closed import arbitrage window.

In the benzene market, prices in Asia were underpinned by scarce availability of prompt cargoes for May loading following a recent spate of plant issues and firm demand.

A series of plant troubles from the second half of March, spanning the Middle East, China, Japan and southeast Asia have caused the shortage of prompt parcels.

Some regional sellers were also trying to cater to the US and Europe where prices are rising.

Economic recovery across Asia has been picking up amid rollouts of COVID-19 vaccines, with downstream segment faring well.

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

China’s import appetite for benzene has revived this year, following a very stale 2020.

Inventories along eastern China have fallen by half from the start of the year to around 125,000 tonnes in April, indicating firm benzene demand.

In the acetic acid market, supply from China is being constrained by the unsuccessful restart of Henan Shunda’s plant and production issues at Jiangsu Sopo Chemical’s 1.2m tonne/year plant.

Export-oriented Jiangsu Sopo Chemical is running the plant at reduced load.

Meanwhile, buying enquiries from Europe are on the rise bolstering sellers’ sentiment as demand for May shipments in northeast Asia is also firm.

In the Indian acetic acid market, a cautious sentiment prevails as the tight supply may be temporary while restocking is expected in the first half of April.

On paraxylene (PX), prices in Asia remained weighed down by persistent margin weakness in downstream purified terephthalic acid (PTA) in China.

Asia’s PX supply is balanced to slightly tight due to a combination of upcoming planned maintenance and unplanned shutdowns.

This is largely reflected in the intermonth spread between prompt and forward months staying in a slight backwardation.

Squeezed margins are likely to curb higher PX run rates.

Focus article by Felicia Loo

Additional reporting by Clive Ong, Izham Ahmad, Aviva Hu, Helen Lee and Samuel Wong

Photo: Pasir Panjang Terminal in Singapore on 6 April 2021 (By Suhaimi Abdullah/NurPhoto/Shutterstock)

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