China paraffin wax may rise on better demand, tightening supply

14 February 2014 03:58 Source:ICIS News

By Daphne Ho

Paraffin wax is used in candlesSINGAPORE (ICIS)--China's export prices of paraffin wax may increase in the near term as scheduled turnarounds at domestic facilities will tighten supply of the material amid an expected pick-up of demand, market participants said on Friday.

On 12 February, the prices for benchmark grade of fully refined 58/60°C grade paraffin wax were assessed at $1,360-1,400/tonne FOB (free on board) China Main Port (CMP), according to ICIS data.

Prices have stagnated at these levels since mid-December last year because of lacklustre demand from candle, food packaging and matchstick industries that has been prevailing since the third quarter of 2013.

China – a net exporter of paraffin wax with the US, Europe and India as markets – will have less supply in March and April as some of its major production facilities are due for turnaround.

Sinopec Shanghai Gaoqiao Petrochemical’s 150,000 tonne/year plant will be taken off line for two months from March, but the exact shutdown dates have yet to be fixed.

Meanwhile, Dalian Petrochemical’s 180,000 tonne/year paraffin wax unit in Liaoning province will be shut in April, in line with the turnaround of its 450,000 tonne/year Group I base oils plant at the same site, according to market sources close to the company.

Slackwax, which is produced in the refining of base oils, is the raw material for paraffin wax production.

Gaoqiao Petrochemical and Dalian Petrochemical wax units produce benchmark grade 58/60°C paraffin wax for exports.

Demand for paraffin wax typically picks up towards the Easter holidays in the US and Europe. Easter, which marks the end of the observance of Holy Week, falls on 19 April this year.

In spite of the seasonal increase in demand, some market players doubt this will provide a strong boost to China’s export prices of paraffin wax.

Supply in the country has traditionally been balanced to long, and competitively priced substitutes such as palm wax and synthetic wax are available. Synthetic wax, in particular, is gaining popularity in southeast Asia and India.

But these alternative products could not fully substitute paraffin wax, which is the base wax for blending in candles.

Waxes from natural sources are yellow  and are incapable to hold colour and fragrance well. Palm wax also burns faster that it can only be a partial substitute for paraffin wax, according to market players.

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By Daphne Ho