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Asia petrochemicals outlook, w/c April 5

Singapore — Many petrochemical markets in Asia are expected to witness bearish sentiment in the week. High production rates in China and competitive domestic supplies, along with a cooling-off effect post the US deep freeze, would likely build pressure on prices, market participants said.

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The CFR China propylene marker is poised to trend lower in the week as sellers were dropping their offers to entice wary buyers that are switching to cheaper and ample domestic supply. The marker retreated $50/mt on the week and landed at $1,100/mt CFR China April 1 amid weaker downstream polypropylene. The spread between CFR China and FOB Korea narrowed to $5/mt in the week to April 1, down $20/mt from $25/mt the week before. Supply in South Korea remained tight as Hanwha Total and SK Advanced started their new 400,000 mt/year polypropylene plant in February-March, which has reduced spot supply to China.


The acrylonitrile market in Far East Asia and South Asia are likely to face downward pressure in the week after both markers hit record highs mid-March. Acrylonitrile supplies in the US and Europe have been tight since last month due to force majeures announced by Cornerstone and INEOS, respectively. The deep freeze in the US in February added to a bullish sentiment, but buyers were confident that more supply will reach Far East Asia after INEOS planned to start production in first-half April. Moreover, many China-based producers were running at full rates and buyers were not in a rush to buy spot materials, sources said.


Lengthening supply in the Asian toluene market would likely soften outlook for the week as demand from the solvents sector had plateaued and toluene disproportionation stream requirements appeared mixed. FOB Korea toluene dipped to $678/mt on April 1 from $680/mt a week prior, suggesting rangebound price movement in Asia.


With trading set to shift focus to May from April in the week, the tight market balance seen in April is likely to ease. Gasoline demand has remained soft in China, but with typically higher demand expected closer to the summer season, it remains to be seen if toluene demand can pick up going forward. Downstream OX was seeing poor demand in Asia, especially in the China market. Margins for PX production are also poor, so demand for MX into both OX and PX should be sluggish, participants said.


The Southeast Asian methanol market is expected to turn softer in the week with the restart of Indonesian methanol producer Kaltim Methanol Industri's 710,000 mt/year plant. Additionally, discussions for Southeast Asian spot cargoes could be muted as a number of end-users in Indonesia had already covered their purchases for April.

Purified terephthalic acid

Market fundamentals remain relatively strong for Asian PTA in the week started April 4 due to tight spot availability and extensive maintenance works, despite high total stocks in China. China-based PTA producers are still under pressure from negative margins, with the PTA-PX spread averaging Yuan 294/mt (around $45/mt) since March compared with the typical breakeven spread of Yuan 500-700/mt, S&P Global Platts data showed.


Chinese PP demand has slowed with many downstream converters, especially woven bags and BOPP film producers, deciding to take a longer holiday amid the Qingming festival in response to squeezed profit margins and sluggish demand. Chinese PP sellers continue to actively export PP to Southeast Asia and South Asia while most other sellers remained firm on offers, leading to a mixed sentient with a wide price gap for PP cargoes from China and other origins.