Asia petrochemical trades subdued; China post-holiday demand uncertain

SINGAPORE (ICIS)–Petrochemical trades in Asia may pick up mid-week with as Chinese markets re-open after a week-long holiday, but industry players remained bearish on demand recovery prospects.

• Trades subdued during 1-7 October China holidays
• Crude, naphtha prices rise amid geopolitical tensions
• China to announce more economic policies

Crude gains on escalating Middle East tensions, weather-related disruptions in northeast Asia and the monsoon season in India were all factors that will affect trading this week.

In late Asian trade, Brent crude breached $79/barrel, while US crude was trading at above $75/barrel, on growing fears of a wider conflict in the Middle East a year since the Israel-Hamas war began.

Demand concerns, particularly in China, however, continue to cap gains.

Prices of naphtha – the main petrochemical feedstock in Asia – typically track gains in upstream crude market.

At noon, naphtha prices stood at $700/tonne CFR (cost & freight) Japan.

With firm naphtha prices, production margins of petrochemical producers get squeezed.

In the propylene and polymeric methylene diphenyl diisocyanate (PMDI) markets, players were awaiting clearer direction from China, whose players will return to the market on 8 October.

For acetic acid, import demand from India slowed down as the seasonal monsoon in the country, which should have ended in late September, extended its stay and is expected to affect restocking ahead of Diwali holiday in end-October/early November.

Diwali is the Hindu Festival of Light and is a major holiday in India.

In Taiwan, Typhoon Krathon directly hit its petrochemical hub of Kaohsiung last week, causing power outages that affected plant operations at the site, with some units likely to be shut for days.

In the case of Taiwan VCM (TVCM)’s 450,000 tonne/year vinyl chloride monomer (VCM) plant, it sustained equipment damage and may have to be down for 7-10 days, sources said.

The consequent reduction is supply of some petrochemicals, however, will likely have a minimal impact on markets as demand remains largely weak.

EYES ON CHINA
Market players are expecting more economic measures from China post-holiday, which will follow a slew of policy announcements days before its week-long National Day celebration.

China’s State Council announced on 6 October that the National Development and Reform Commission (NDRC), the country’s top economic planning body, will hold a press briefing on 8 October.

In its announcement, the State Council referred to “systematically implementing a package of incremental policies to solidly promote economic growth, structural optimisation and sustained momentum of development”.

China’s recent economic stimulus package have boosted investor sentiment, mainly in the equities markets, but there were doubts over any near-term lift to economic activity.

Focus article by Jonathan Yee

Additional reporting by Seng Li Peng, Jonathan Chou, Helen Lee, Shannen Ng and Hwee Hwee Tan