Asia petrochemical trades wane; Trump’s tariff threat weighs on Feb outlook

SINGAPORE (ICIS)–Trades in Asia’s petrochemical markets have slowed down ahead of the Lunar New Year holiday, with a general oversupply in the region and the threat of US tariffs clouding the outlook in February.

• Some downstream plants start shutting down two weeks before the holiday
• Buyers mostly stay on sidelines while some suppliers raise prices
• Players cautiously optimistic over post-holiday demand

Demand across oleochemicals, polyethylene (PE) film, acrylonitrile butadiene styrene (ABS), styrene acrylonitrile (SAN) has softened as factories wind down or shut operations ahead of the Lunar New Year holidays.

The Lunar New Year, which falls on 29 January, is celebrated in most parts of northeast and southeast Asia, with China on holiday from 28 January to 4 February.

Uncertainty over US trade policy under Donald Trump’s administration, which expressed its intention to impose 10% tariffs on China from 1 February, has weighed on market sentiment going into and during the holiday.

“China is slowing down ahead the Lunar New Year. Buying interest is low as market players are going away back to their hometowns,” said a source in the PE pipe grade market.

A southeast Asia-based glycerine producer said: “We have not been getting any enquiries from China recently for glycerine, so we have been focusing on other regions.”

Same conditions were observed in Vietnam, which is on holiday from 27 January to 3 February.

Spot transactions were minimal in Asia, with trade discussions mostly deferred until after the holidays.

MARKET ACTIVITY TO RESUME H2 FEB
In the Asian recycling market, active trades may only resume when major exporters in China and Taiwan are back in the second half of February from a prolonged holiday.

China and Taiwan have the largest exporters of recycled polyethylene terephthalate (rPET), recycled polyethylene (rPE) and recycled polypropylene (rPP) pellets.

Meanwhile, suppliers of PE pipe grade, titanium dioxide (TiO2), and caprolactam (capro), have either reduced spot supply or hiked prices before the holiday even though demand remains weak.

In the TiO2 market, players deemed the price hike on 21 January was more in anticipation of some improvement in post-holiday demand.

“I don’t expect many trades to happen before LNY [Lunar New Year]. Most buyers said they are covered,” one market player said.

TRUMP WORRIES CONTINUE
For capro, styrene monomer (SM) and monoethylene glycol (MEG), demand is expected to improve post-holiday on seasonal restocking or improved opportunities for Chinese exporters.

However, uncertainties over US President Donald Trump’s trade policies, including potential 10% tariffs on Chinese products from 1 February, and oversupply in key markets are tempering optimism in the near term.

In December 2024, ABS and SAN end-users ramped up production to frontload shipments of contractual volumes to the US ahead of Trump’s widely anticipated tariffs of as much as 60% on Chinese goods.

This led to a marked increase in China’s styrenics exports for the month.

Starting January, these end-use factories reduced their run rates, having met their contractual obligations, with some having shut their plants as early as last week.

The pre-Lunar New Year period typically sets the stage for post-holiday recovery, when inventories are cleared and demand resumes.

Market players were keeping a cautiously optimistic outlook on demand recovery.

“Ethyl acetate (etac) inventories will rise [post-Lunar New Year holiday] with production, but [Chinese domestic] demand will remain weak in February,” said a China-based market source.

All eyes are focused on how soon Trump will impose his promised tariffs, with actual market impact likely to be felt a month after the announcement, according to market players.

Focus article by Jonathan Yee

Additional reporting from Yvonne Shi, Izham Ahmad, Arianne Perez, Helen Yan, Angeline Soh, Seng Li Peng, Isaac Tan, Joson Ng, Tan Hwee Hwee, Luffy Wu, Yvonne Shi, Melanie Wee, Judith Wang

Thumbnail image: At Qingdao Port in Shandong province, China, on 23 January 2025. (Costfoto/NurPhoto/Shutterstock)