Asia petrochemical markets mixed amid high inflation

Felicia Loo

09-Nov-2022

SINGAPORE (ICIS)–Asia’s petrochemical markets were mixed amid economic headwinds and dampening consumption in China amid a slowing economy, with no let-up on its harsh zero COVID-19 policy, dampening consumption.

The situation is being exacerbated by high inflation, which is threatening to plunge major world economies into a recession.

For the acrylonitrile-butadiene-styrene (ABS) market, there were limited pillars of support as downstream demand is weak while feedstock benzene and styrene monomer (SM) prices have also softened.

Q4 is the typical seasonal lull, with surging energy costs amid the Russia-Ukraine war exacerbating poor end-user consumption.

Tightened lockdowns across China to quell COVID-19 flare-ups weigh further on market sentiment.

In the liquid caustic soda spot market, supply continued to outpace demand, with Chinese producers focusing their attention on exports amid dull domestic demand.

The yuan depreciation against the US dollar also provided an incentive for Chinese producers to export more products.

Arbitrage demand from Europe remained slow, leaving sellers little choice but to lower their price indications to encourage buying activities.

In the adipic acid (ADA) market, China’s export prices continued to tumble amid volatility in feedstock benzene prices in the domestic market.

For cargoes originating from other markets, price pressures from higher cost are being mitigated by lack of spot demand.

In contrast, the paraxylene (PX) market in Asia finds support from a supply reduction caused by a combination of operating rate cuts and scheduled plant shutdowns.

Relatively firmer feedstock isomer grade mixed xylenes (MX) have led regional producers to sell their feedstock, instead of producing PX at uneconomical production margins.

Refineries were also gearing towards maximum yields of middle distillate amid better margins, thus curtailing higher run rates at aromatics production units.

Reduced PX production and no shutdown plans at downstream purified terephthalic acid (PTA) facilities in China has tightened prompt PX supply in Asia.

A tightly supplied PX market will only gradually ease once new PX facilities commence commercial operations from yearend to early Q1 2023.

Focus story by Felicia Loo

Additional reporting by Angeline Soh, Jonathan Chou, Josh Quah and Samuel Wong

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