Asia key petrochemicals track China post-holiday gains, crude rally

SINGAPORE (ICIS)–Asia’s key petrochemical markets have strengthened, tracking the post-holiday rally in China, on the back of robust gains in upstream crude futures.

Spot naptha prices extended their gains on Monday also on expectations of tightening supply.

Oil prices hit their highest in years on Monday, following last week’s gains of at least 3% for both US WTI and Brent, on signs of further demand recovery from the pandemic.

Spiking prices of gas and coal amid a global shortage are forcing consumers to switch to fuel oil and diesel.

At 06:07 GMT, Brent crude was 83 cents higher at $85.69/bbl, off an intra-day high of $86.04/bbl; while US WTI was up by $1.13/bbl at $83.41/bbl, after hitting a high of $83.73/bbl.

Petrochemical prices in China surged when markets re-opened after a week-long hiatus to a tightened supply environment and strong crude prices.

In Asia, ethylene spot prices rose to around a 30-week high last week on strong Chinese buying amid logistic bottlenecks and high feedstock costs.

Spot supply could fall short of China’s demand for November-arrival cargoes as vessel tightness outweighs the healthy availability of free-on-board (FOB) tonnes from producers in northeast and southeast Asia.

China’s domestic ethylene prices surged, bolstered by post-holiday restocking and methanol-based supply cuts.

Several ethylene buyers ramped up production after the country’s week-long National Day holiday on 1-7 October, as local authorities have eased energy consumption curbs in certain regions.

In the propylene market, spot prices in northeast Asia had soared early last week on strong downstream polypropylene (PP) futures in China, but tempered by expectations that supply could lengthen in the country’s domestic market in the fourth quarter.

Spot liquidity was constrained as most market players assumed a wait-and-see position.

In the southeast Asian PP market, discussions tracked the strong gains in China early last week but slowed down as the week progressed as PP futures market lost steam.

In the styrene monomer (SM) market, prices early last week had breached the psychological barrier of $1,300/tonne CFR China for the first time since May 2021.

But the gains were immediately followed by a sell-off in the middle of the week on profit-taking.

The market has mixed demand-supply fundamentals, which could continue into most of the fourth quarter.

In the toluene market, discussions for FOB Korea cargoes were higher, with China’s ex-tank prices inching up in many countries like Vietnam and Indonesia, with recovering demand from downstream users as COVID-19 restrictions have been lifted.

In the butanediol (BDO) market, Chinese prices were on an uptrend as local supply is hampered by logistical challenges.

For ethanolamines, availability was tight as production was hit by China’s dual-control policy on energy consumption.

In the polybutylene terephthalate (PBT) market, suppliers were lamenting squeezed margins from elevated feedstock BDO values.

In the oleochemicals space, China’s demand for fatty alcohol ethoxylates (FAE) is expected to remain strong amid soaring prices of feedstock ethylene oxide (EO) and fatty alcohols.

Several feedstock fatty alcohol and ethylene oxide (EO) plants in China were shut or were running at reduced rates.

Focus article by Nurluqman Suratman

Photo: At the Ningbo-Zhoushan Port in east China’s Zhejiang Province – 15 August 2021. (Source: Xinhua/Shutterstock)