Asia petrochemicals at multi-year highs on strong crude, bullish China markets

SINGAPORE (ICIS)–Key petrochemical markets in Asia have hit multi-year highs, driven up by strong crude gains following winter storm-related US output disruptions, and robust post-holiday activity in China.

Naphtha – the main feedstock for Asian petrochemical production – was trading on Wednesday near the $600/tonne CFR (cost & freight) Japan mark, which was breached the previous day to hit its highest price since December 2019.

Benzene remained at $846/tonne FOB (free on board) Korea at midday, after gaining by more than 6% over two days.

“All petchems in China [are] up…Everything else [is] just tagging along,” a source at a major southeast Asian oleochemical producer said.

Oil prices remained at their highest in nearly a year, despite a pause in the strong uptrend on Wednesday as industry data showed an unexpected rise in US crude inventories last week.

At midday, Brent crude was down by 34 cents at $65.03/bbl while US WTI crude fell by 53 cents to $61.14/bbl.

Concerns about slow restoration of US production had driven up crude prices early in the week.

Oil and natural gas production shut-ins in Texas and other producing states in the US was crippled by an arctic blast last week, affecting some 20% of total US refinery capacity or about 5.7m bbl/day.

Since the start of the year, oil prices have surged by more than 25% on general optimism over demand amid global rollouts of COVID-19 vaccines.

In the paraxylene (PX) market, Asian prices hit fresh record highs in the week at above $840/tonne CFR Taiwan/China Main Ports (CMP) levels on the back of hefty crude gains amid a stronger downstream purified terephthalic acid (PTA) market.

China’s May PTA futures contract spiked by 3.07% on Tuesday.

Downstream polyester markets in Asia have improved with the approach of the traditional peak demand season, adding to the bullish tone for the PX market.

In the isomer-grade mixed xylenes (MX) market, regional prices also rallied on the back of firm upstream prices and a strong China domestic market.

Spot MX prices in the FOB (free on board) Korea market on 23 February rose by more than $20/tonne from the previous day.

China’s petrochemical markets have been leading the gains in Asia since they re-opened after a week-long Lunar New Year holiday on 11-17 February.

Stronger futures markets in China for both PTA and monoethylene glycol (MEG) supported spikes in Chinese polyethylene terephthalate (PET) offers.

PET prices have been increasing since November 2020 amid underlying tightness in Asia-origin spot supply and its feedstocks PTA and MEG.

In the butyl acrylate (butyl-A) market, export discussions in China surged after the Lunar New Year holiday, tracking strong domestic market gains on the back of bullish feedstock n-butanol prices.

In the glycerine market, restocking by Chinese buyers is strong following the Lunar New Year holiday.

For melamine, spot indicative prices in China’s export market were higher so far on Wednesday amid higher feedstock prices, a lack of selling pressure and firming domestic demand in China.

Selling indications were at around $1,100-1,150/tonne FOB (free on board) China, up by as much as $110-160/tonne than the high end of the assessed prices in the week ended 17 February.

In the fatty alcohols market, selling indications of major producers have surged on strong Chinese spot interest and higher raw material costs.

Chinese fatty alcohols market players have sought to restock and replenish their dwindling inventories post-holiday.

For epoxy resins, regional prices hit their highest since 2017, taking the cue from recent price surges in raw material bisphenol-A (BPA) which were squeezing producers’ margins.

On 23 February, epoxy resins trades settled at an average of $3,750/tonne FOB (free on board) NE (northeast) Asia, 17% higher than at the beginning of the month, ICIS data shows.

Focus article by Nurluqman Suratman

Additional reporting by Pearl Bantillo, Melanie Wee, Clive Ong, Samuel Wong, Helen Yan, Joson Ng, Keven Zhan, Hazel Goh, Li Li Chng and Seng Li Peng

Photo: Offshore oil rig in the Bohai Sea, China (Xinhua/Shutterstock)

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