Asia Petrochemicals: Key market indicators May 31-June 4

The trading sentiment for the Asia petrochemicals market looked balanced with supportive factors observed from the olefins sector whereas aromatics appeared toned down. Plant maintenance activities were still aplenty but some of the key highlights in the week started May 30 would be the addition of plants coming online in June, such as steam crackers from GS Caltex and LG, as well as Zhejiang Petroleum & Chemical's scheduled startup of the second 10 million mt/year (200,000 b/d) crude distillation unit at its 20 million mt/year Phase 2 project.

Propylene

** The CFR China propylene marker is slated to be under further pressure due to ongoing weak downstream polypropylene demand and growing domestic supply.

** China-based buyers have continued to show resistance on spot procurement as they expect the import price to soften further after GS Caltex and LG start their new steam crackers in June.

2-ethyl hexanol

** The 2-ethyl hexanol market is likely to receive more support in the week started May 30 amid tight spot supply. The Yuan-denominated price for 2-EH was concluded at Yuan 14,900/mt in the week to May 27, up 400/mt on the week.

** The price is likely to gain further support only after key producer Qilu Petrochemical restarts its 250,000 mt/year plant on June 4.

Butadiene

** The Asian butadiene market sentiment was firm to start the week, supported by an open Asia-US arbitrage window while the Europe-US route is shut.

** Some end-users in Asia expected supplies in the region may turn tight as ex-Asia cargoes may move to the US.

Paraxylene

** Market participants will monitor the June Asia Contract Price for paraxylene that is expected to conclude negotiations by the end of May 31. Negotiations for the May PX ACP failed to result in a settlement. The last major settlement for PX ACP was at $870/mt CFR Asia for March.

** The short-term PX sentiment and market confidence, particularly for July, has weakened as supply tightness eased while there were demand concerns from downstream Chinese purified terephthalic acid plants, several sources said.

** Uncertainty around market direction is heightened for subsequent months with the startup of Zhejiang Petrochemical's Phase 2 PX plant and Yisheng Petrochemical's PTA unit in Ningbo nearing, sources added.

Isomer-MX

** There is a possibility the supply tightness seen during the second quarter might ease as mainstream trading activity shifts to July in the week started May 30, with turnarounds in Japan expected to be ending in the third quarter. Furthermore, one of Asia's largest end-users, Taiwan's Formosa Chemicals and Fibre Corp. plans to shut its No. 2 aromatics plant at Mailiao mid July for about 45 days of planned maintenance, which may also lead to lower demand.

** Gasoline blending demand for MX in China appears to be sluggish with domestic prices weakening.

** The spread to naphtha narrowed $41.63/mt over the week ended May 29 at $149.75/mt, while the spread to paraxylene was at $62.67/mt, wider $13/mt on the week.

Toluene

** The outlook for the Asian toluene market seemed mixed as demand in most localities in the region was slumping.

** Stockpiling activities in the domestic east China toluene market, which was a local blending hub for the country, was still flatlined, reflecting muted demand for toluene in the area. In India, demand was still weighed down by the coronavirus situation.

** The FOB Korea toluene physical stood at $740/mt on May 28 -- the lowest level after $731/mt on May 4.

MTBE

** The Asian MTBE FOB Singapore marker is expected to remain supported on the back of steady demand from China ahead of the new consumption tax on light cycle oil and mixed aromatics, effective June 12.

** The worsening pandemic in Southeast Asia, especially in Malaysia and Vietnam, would continue to add downward pressure on the Asian MTBE market.