The week ahead in petrochemicals in EMEA

London — OLEFINS: Length in the European propylene market is expected to disappear, with demand slowly picking up after the holidays period and amid talk of planned and unplanned outages at steam cracker units.

Downstream restocking and unplanned issues have drawn on supplies in the ethylene market. Demand is set to remain on both a prompt basis and into February. Players in the market are watching the US-Iran tensions for potential bullish movements in upstream energy. Run cuts of butadiene in Asia are being watched closely this week, with ample supply in Europe in case of any increase in export demand. The domestic situation will remain difficult from a logistics perspective however, as rail strikes across France continue.

POLYMERS: Sentiment for the polyethylene market will remain buoyant this week, following the news that some grades of PE appear on a list of products forming a new US-China trade agreement. Buyers in the propylene market retain concerns on underlying demand, especially from the automotive industry, and it will be difficult for polymers to track increases in feedstock without a demand pickup. PVC shorts in the Mediterranean will continue this week, as shipment and transport issues in France have a knock-on effect. Spain will also remain in short supply as force majeure continues at a local facility. Prices will continue strong into next week, as restocking demand will compete for material. Turkish markets will be keeping a closer eye on the geopolitical situation in Iran to ascertain supply threats, as well as any risk of further price increases from US sellers. Rising feedstock costs and restocking activities will dictate the direction of the polystyrene markets this week, with contract negotiations continuing.

AROMATICS: European mixed xylenes face another tough week, as extraction economics remain poor. The thin spread between MX and toluene will continue to limit supply, but no uptick in demand is expected in turn. The toluene market is under similar pressure, though some trade could be seen as some talk of export cargoes being assembled ready for March blending in the US has been heard. Downstream, paraxylene and orthoxylene contract prices are expected to be settled this week. In benzene, prices are expected to remain supported this week as prompt demand has moved against price falls in the upstream. With little material available last week, demand is expected to continue. The styrene market uptrend is expected to continue this week, as producers continue to battle against an unprofitable margin against feedstock benzene.

METHANOL: Market participants in the European methanol market will keep an eye on Asia as heightened geopolitical tensions in the Middle East and tightening supplies have added upward pressure to spot prices. Downstream, MTBE will be off to a strong start as buying appetite is expected to be sustained. High prices in the US will support the market, as well as restocking activities for the start of the year. Political tensions and turnarounds in the Middle East are also expected to create opportunities for European sellers.

INTERMEDIATES: Discussions are set to begin this week for Q1 caustic soda contracts in Europe, with cheap imports laying concerns at the feet of European producers over both volumes and pricing.