New York — The Asian petrochemical market will continue to monitor upstream crude oil benchmarks and geopolitical tensions closely this week following last week's volatility. The Asian market will be looking to conclude spot trading discussions as soon as possible this week ahead of the Lunar New Year next week.
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The ethylene market in Asia is likely to be firmer this week, due to lower cracker operating rates from Northeast Asian producers and strong restocking demand in China before the Lunar New Year festivities. The ethylene CFR NEA trended $55/mt higher week on week to hit $805/mt Friday.
On the other hand, the price of naphtha dropped last week lending support to cracker ethylene margins in Northeast Asia, boosting cargo availability.
The CFR China propylene market in Asia is poised to move closer to the $900/mt level this week as tighter spot supply resulted in firmer indicative bids and offers. Two major propane hydrogenation plants in China remained shut, while some South Korean crackers have lowered their operating rate amid weak ethylene margins. Supply was especially tight in Southeast Asia as the lack of supply from Northeast Asia saw the marker swinging $50/mt higher week on week to hit $910/mt CFR SEA last Friday.
Asian paraxylene is likely to track crude prices closely this week amid fairly stable supply-demand fundamentals ahead of the Lunar New Year next week.
Meanwhile, the February/March structure has flattened slightly to 50 cents/mt last week, possibility flipping into a contango market structure in the near-term, market sources said.
On the Asian toluene front, the market has hinged buying interests from key demand centers like India and Vietnam, which was proven resilient for February laycan. Southeast Asian supply is expected to be marginally tight as producers limit production, while sources in India cautioned of a wave of new supply heading into the West Coast. The Toluene CFR India marker slipped $3/mt to $782/mt at Friday's Asian close, down from the year-to-date high of $785/mt on January 3.
Asian polypropylene fundamentals is expected to remain weak this week due to ample supply and weak demand. However, the price movement is unclear due to firm upstream propylene prices. Downstream demand has remained relatively lukewarm, as unfavorable macroeconomic conditions limit price gains and as buyers stayed on the sidelines, market sources said. Supply is expected to gradually lengthen given additional PP capacities in China, market participants said.
The Asian low density polyethylene market may extend last week's momentum as buyers will want to replenish stocks ahead of the Lunar New Year. In addition, tensions between the US and Iran is another uncertain factor for supply, which could continue providing support to Asian PE prices.
Asian monoethylene glycol prices are likely to remain strong this week amid low inventories and active buying inquiries for settlement ahead of the Lunar New Year. MEG stocks fell 65,000 mt week on week to 350,000 mt last Thursday at the main ports of East China, a market source said.
In addition, trade participants were worried about an MEG supply disruption from Iran due to a shortage of feedstock LNG during winter. However, a source familiar with the matter said that the only affected products are limited to methane and derivatives, not MEG, but the market sentiment was affected, leading to higher MEG prices Monday morning.
Asian purified terephthalic acid prices are expected to remain under pressure this week amid ample supply and weak demand. In downstream markets, the overall demand along the whole polyester chain will continue to wane ahead of Lunar New Year. The Chinese polyester operating rate has fallen to 78% of total capacity last Friday, down 3% week on week, market sources said.