ASIA: The week in petrochemicals

Asian petrochemical markets entered the trading week starting Nov. 22 on a weak note amid highly fluctuating crude oil benchmarks, with all eyes on term negotiations that are limiting spot discussions.

Prices in the olefins and aromatics markets in particular are bearish, having swung largely in line with volatile upstream markets.

Ethylene

** Spot demand remains weak due to cuts to downstream operating rates amid negative margins.

** Persistent river port congestion in China continues to limit vessel availability.

** Some producers heard to be considering cutting steam cracker operating rates due to low profits.

Polyethylene:

** Logistical constraints and higher energy costs weigh on the Asian polyethylene market.

** Asian low-density polyethylene prices fell in the week to Nov. 17 on weak demand.

** Electricity curbs in China cap downstream polymer converter operating rates, although finished export orders remain at normal levels.

Polypropylene

** Competitive Chinese PP prices and an open export arbitrage window weigh on other Asian PP markets, though China's PP exports are partially restricted by a container shortage and high freight costs.

** PP producers grappling with squeezed profit margins as prices fall, prompting some PDH-based PP plants in China to cut operating rates.

** New offers from the Middle East to South Asia that are likely to be announced around Nov. 25 are expected to be lower than last month.

Toluene

** Toluene buying for gasoline blending in China fell sharply last week and are expected to remain weak Nov. 22-26. Bids and offers were Yuan 100-150/mt apart with little trade seen, Chinese brokers said. Prompt ex-tank supplies were talked at Yuan 6,400-6,600/mt early Nov. 22.

** Asian toluene prices have come under pressure from the lack of interest from India after festive holidays and in Southeast Asia as term 2022 negotiations continue to be delayed. However, with the cycles moving into January 2022, some support is seen from South Korea.

** Toluene saw support late Nov. 19 amid a rally in crude oil, naphtha and adjacent downstream markets, but prices were expected to be stable to softer Nov. 22-26.

Styrene monomer

** Asian SM market sentiment remains mixed amid volatile upstream prices in oil and coal and an uncertain outlook for shipping. China's imports are likely to be thin due to port congestion and relatively ample domestic supply.

** The startup process of new capacities in China that are expected to come online over December-January are being monitored closely.

** The margin for non-integrated producers is likely to remain pressured amid firm upstream and lower SM prices after being calculated at minus $79.60/mt Nov. 19.

Isomer-grade mixed xylene

** China's domestic demand has dwindled and prices are likely to take a further hit this week. Demand as a both a feedstock for paraxylene and as a gasoline blendstock has turned sluggish in recent weeks, and was impacted further after Zhejiang Petroleum & Chemical in late October received a quota to import 12 million mt of crude oil.

** The import quota has enabled Zhejiang to increase output across its product slate, increasing supply of both PX and gasoline in the market and adding pressure to prices and margins.

** The MX inventory level in East China was heard to remain tight at around 26,500 mt.

Solvent-grade mixed xylene

** Toluene and solvent-MX prices are expected to fall further Nov 22-26 in line with crude oil and gasoline prices, a trader in India said, adding: "China gasoline demand is lower than expected."

** The downtrend was also visible in India's domestic market, with ex-tank solvent-MX at Kandla port heard discussed around Rupees 59.50-60/kg, down from Rupee 62-63/kg ther week before.

** Term negotiations for 2022 continue to weigh on trades in Asia, along with weak demand fundamentals.

** Demand is poor as positions are mostly covered until year end, and some Japanese material was being offered to Southeast Asian buyers out of South Korea, sources said. Japanese solvent-MX cargoes that typically moves to China in 1,000 mt lots were deemed too low for freight economics, industry sources said. "In this case, [the Japanese seller will] move to Korea to collate another 2-3 kt to sell, possibly to Southeast Asia," a trader said.

MEG

** The outlook for monoethylene glycol was mixed on generally higher crude prices going into winter, while demand remained lukewarm.

** Downstream polyester operating rates remain low due to China's energy control policies.

** In Southeast Asia, MEG discussions remained muted due to a lack of spot supply.

Purified terephthalic acid

** The Asian PTA market was seen to lack direction Nov. 22 amid bearish sentiment along the Chinese polyester chain and squeezed profit margins.

** Indian buyers were expected to wait for new spot imports offers after high premiums over the past two weeks.

MTBE

** Asian MTBE prices were expected to fluctuate amid emerging buying interest for December-loading cargoes and volatile energy markets.

** South Korea's MTBE supply is set to increase due to new capacity additions, with Hyundai Oilbank planning to start up a new 200,000 mt/year MTBE plant in Daesan by year end and Lotte Chemical and GS Energy a new plant in H1 2022.

** Annual term contract negotiations are ongoing this week, which might subdue spot discussion. A Malaysian buyer was heard to have concluded an annual contract at around $10s/mt to the Mean of Platts FOB Singapore assessments.

Recycled polymers

** Demand for high-quality recycled polyethylene terephthalate grades are likely to remain healthy this week, especially from the West.

** Supply of rPET remains tight across Asia, prompting some companies to pay a premium to secure raw materials.

** The outlook for recycled polyethylene was stable for the week starting Nov. 22 as traders were not active due to wide price and product quality fluctuations.