OUTLOOK ’18: SE Asia MA prices to face upward pressure on China import demand

SINGAPORE (ICIS)–Southeast Asia’s maleic anhydride (MA) spot prices may increase in the near term as the region is now competing with China for scarce import supply.

ICIS assessed MA prices in southeast Asia at $1,380-1,420/tonne CFR (cost & freight) SE (southeast) Asia on 15 December.

MA is mainly used to produce unsaturated polyester resins (UPR). Other applications include butanediol (BDO) for engineering plastics and solvent in paints.

In China, domestic prices have surged as the Chinese government continues to clamp down on plants that do not meet its environmental regulations.

Domestic prices were at Chinese yuan (CNY) 13,500/tonne ($2,039/tonne) ex-tank on 15 December.

“It is unknown how many plants are shut [in China] because many producers do not announce it,” a China-based trader said.

“Now, buyers in China are snapping up domestic cargoes even though some of these orders can only be delivered by end-January. They are worried that if they do not secure cargoes now, supply will be even tighter next year,” the trader said.

Some northeast Asian producers have seen increased enquiries for spot import cargoes into China in December compared with previous months.

“China doesn’t typically import MA because they are self-sufficient. In the last few years, they were also exporting MA,” a northeast Asian producer said.

“However, with the stricter environmental regulations implemented by the Chinese government, supply has been tight since the beginning of this year,” the producer said.

Another northeast Asian producer has been diverting all its cargoes from southeast Asia into China since the beginning of the year to achieve better netbacks.

Currently, there is no indication that the Chinese government will ease its environmental regulations.

Meanwhile, buyers in southeast Asia have been purchasing small quantities in December since they want to maintain lean inventories as the current financial year comes to a close.

Despite lower feedstock butane prices in December, most market participants were not expecting to see a price correction in the MA market as supply remains tight.

Saudi Aramco’s December contract price for butane was set at $570/tonne FOB (free on board) Ras Tanura, down by $10/tonne from the previous month.

Demand in southeast Asia is expected to remain tepid in the coming year amid lukewarm demand for downstream UPR.

“Demand for UPR has been rather weak for most of 2017 so we have been prudent with our MA purchases, and we will continue to buy on a need-to basis in 2018,” said a buyer in southeast Asia.

Outlook article by Amy Tan