Cost push, tight supply buoy up few Asia petrochemicals amid general slump

SINGAPORE (ICIS)–While the US-led trade war has roiled Asia’s petrochemicals market, sending prices of some on free fall, a selected few products have bucked the trend due to rising feedstock cost and tightening supply, but the support may be temporary amid global economic headwinds.

• Oxo-alcohols to lead April price gains in April – ICIS forecast
• Trade war weighs on demand, economic growth
• China warns countries against striking US trade deals at its expense

Spot propylene prices in northeast Asia were tracking gains in feedstock propane as production in China is being curtailed by high cost.

About a third of China’s propylene production is produced via the propane dehydrogenation (PDH) route, but imports of feedstock propane from the US are now subject to hefty tariffs amid the renewed US-China trade war.

Meanwhile, spot prices of oxo-alcohols such as 2-ethylhexanol (2-EH), dioctyl phthalate (DOP), and n-butanol (NBA) have risen as constrained production tightened supply.

Supply-side pressures have allowed them to outperform despite weakness in the broader market.

For epichlorohydrin (ECH), prices were largely stable, supported by limited availability, with plants in northeast Asia running at below 50% of capacity.

Meanwhile, restocking was taking place in China ahead of the week-long Labor Day holiday in early May.

ECH is a chemical intermediate used in the production of synthetic rubbers, resins, and pharmaceuticals, among other industrial uses.

Downstream epoxy resins prices are also stable amid restocking following price falls in March.

In the fatty alcohol mid-cut market, prices are rising on tightened supply and elevated cost of feedstock palm kernel oil (PKO) in Indonesia.

Two regional plants – one in Malaysia and another in Indonesia – are currently shut for scheduled maintenance, while another plant in Malaysia remains shut due to an unplanned outage in early April.

The Malaysian plant was shut at the start of the month due to a fire incident.

Generally, demand has remained soft as buyers adopt a risk-mitigation strategy to better navigate the uncertain market, ICIS analyst Ann Sun said.

The majority of chemical prices are forecast to decline in tandem with falling oil prices, weighed down by recessionary fears, Sun added.

Amid uncertainties surrounding markets, traders – notably those in China – are searching for alternative paths away from the US towards regions with lower tariffs such as southeast Asia, Latin America, and Europe.

Some US goods bound for China are also being re-routed to other countries like India amid high tariffs.

OUTLOOK
The volume of world trade is expected to fall by as much as 1.5% if US President Donald Trump’s “reciprocal” tariffs are back on the menu after a 90-day suspension lapses, according to the World Trade Organization (WTO).

Meanwhile, the US and China appears to be on an all-out trade war, having imposed tariffs exceeding 100% on each other.

Export front-loading is taking place globally as markets seek to avoid further complications wrought by future tariff announcements by the US.

But not all countries have posted export growth.

South Korean exports fell in the first 20 days of April by 5.2% year on year – the first signs that US tariffs are beginning to hit global trade hard, said Min Joo Kang, senior economist for South Korea and Japan at Dutch financial institution ING.

In southeast Asia, Malaysia’s gross exports in March grew by 6.8% year on year, led by front-loading ahead of Eid ul Fitr festival, Singapore-based UOB Global Economics & Markets Research economists said in a note on 21 April.

Eid ul Fitr marks the end of Ramadan, the Muslim fasting month.

But UOB predicted a dimmer external trade outlook ahead for Malaysia, depending on how tariff negotiations with the US pan out.

Malaysia, along with other ASEAN member nations such as Vietnam, Thailand and Indonesia, is sending a trade delegation to the US on 24 April.

The southeast Asian country was slapped with 24% tariffs by Trump on 2 April prior to the levies’ 90-day suspension.

The country’s gross domestic product (GDP) rose 4.4% year on year between January-March amid worries of lower growth outlook for 2025.

Markets in southeast Asia, which were some of the hardest-hit by Trump’s tariffs, are anxiously waiting for the results of trade negotiations with the US before the 90-day suspension is up in July.

Chinese President Xi Jinping has urged southeast Asian governments to unite against “unilateralism” during his recent tour of Vietnam, Malaysia and Cambodia.

Separately, China warned countries against striking deals with the US at its expense, a spokesperson for the Ministry of Commerce said on 21 April.

“Sacrificing others’ interests to obtain so-called exemptions for temporary selfish gains is akin to negotiating with a tiger; it ultimately leads to failure for both parties and harms everyone involved,” it said.

Focus article by Jonathan Yee

Additional reporting by Matthew Chong, Izham Ahmad, Claire Gao, Helen Yan, Josh Quah, Aswin Kondapally and Julia Tan

Visit the ICIS Topic Page: US tariffs, policy – impact on chemicals and energy.