China chemical markets to stay weak during Shanghai import expo

SINGAPORE (ICIS)–China’s domestic chemical markets may stay soft this week after a heavy slump despite restrictions in production and logistics during a major import expo in Shanghai.

A port on the bank of Huangpu River in Pudong, Shanghai, China. (Photo by Imaginechina/REX/Shutterstock)

The price downtrend since October might not be reversed given volatile global political and economic environment, the stronger US dollar and falling crude oil values.

Among actively traded petrochemicals, monoethylene glycol (MEG) and styrene monomer (SM) had plumbed to new lows last week and their prices are expected to continue falling.

On 5 November, MEG prices in east China were at yuan (CNY) 6,650-6,710/tonne, down by around 10% from early October, while SM prices in east China were at CNY9,450-9,500/tonne, down by 21% over the same period.

The five-day China’s International Import Expo (CIEE), the first one organized on a national level, kicked off on 5 November.

Production and transport of dangerous chemicals are being restricted in Shanghai as well as in surrounding regions.

China typically imposes restrictions on production as an anti-pollution measure when hosting a major event.

Some chemical plants that are currently shut for turnaround might not be restarted as scheduled.

Shanghai Gaoqiao Petrochemical shut its phenol/acetone plant in early October for a planned maintenance, and is scheduled to resume operation at the unit in late November, taking into account the expo schedule.

Shanghai SECCO’s ethylene cracker, downstream units and aromatics plants are undergoing a major annual turnaround from mid/late September, and will restart in late November.

Chang Chun Chemical (Changshu)’s 135,000 tonne/year BPA and 480,000/tonne phenol/acetone plants in Jiangsu province were shut for maintenance from late September to early October. They were originally planned to restart in early/mid-November, but the restart date might be postponed due to the expo.

Some small- and medium-sized producers in Shanghai and Suzhou have suspended operations, particularly those that manufacture epoxy resins, unsaturated polyester resins (UPR) and dyes.

Others, with manufacturing bases in the city, including Shanghai Petrochemical and Shanghai Huayi, are maintaining stable operations and are not affected by the restrictions, company sources said.

Meanwhile, transportation of dangerous chemicals in Shanghai are prohibited from 2 to 12 November, with specific control measures in place on shipping in the Huangpujiang River and the Shanghai section of the Yangtze River.

Petrochemical producers in Shanghai are asked to suspend cargo deliveries for one week during the expo. Downstream producers would have to rely on feedstock allocated from plants or ports outside Shanghai during the period.

Cargo deliveries shall avoid the Huangpujiang River, and must be shipped from warehouses at Zhangjiagang port, Taicang and Jiangyin in Jiangsu province. Another option is delivery by trucks.

These logistics restrictions might lead to more offtakes at major east China ports before and after the expo, and possibly lead to lower inventories, which could buoy up sentiment in the chemical markets.

Focus article by Cindy Qiu

($1 = CNY6.92)