Bearish sentiment prevails in Asia petrochemicals amid oversupply

SINGAPORE (ICIS)–Weak downstream demand, exacerbated by economic and geopolitical uncertainties, keeps sentiment bearish and buyers cautious across petrochemical markets in Asia.

• Sluggish demand to continue into Q2 amid oversupply
• China’s surging exports a concern among Asia producers
• China, South Korea prepare stimulus measures amid US tariffs

REGIONAL PRODUCERS FEEL STRAIN
China’s aggressive capacity expansion which led to increased exports has been exerting pressure on other Asian producers.

For caprolactam (capro), the country turned into a net exporter in 2024, with shipments doubling from two years ago.

This flood of Chinese exports has intensified regional competition, forcing capro plant closures in Japan and Thailand due to unsustainable margins.

In the ethylene vinyl acetate (EVA) market, massive capacity expansions in the next three years are projected to push China’s production capacity to 63% of the global total by 2027.

As a result, the country’s EVA imports are likely to decline further, while exports are projected to continue increasing.

In the naphtha market, supply constraints due to limited arbitrage cargoes and higher demand from new cracker start-ups in China and Indonesia have driven intermonth spreads to the highest levels seen in a year on 11 March.

Refinery maintenance in China has also further restricted domestic naphtha supply, tightening overall availability in Asia.

For aromatics such as benzene, toluene, xylene, paraxylene (PX), and mixed xylene (MX), prices fell in the week ended 14 March, weighed down by ample inventories and subdued demand.

For acetone, prices have risen on tight supply because of plant maintenance, squeezing the margins of downstream isopropanol (IPA) producers, with LG Chem planning to shut its plant for a month from end-March.

Meanwhile, palm oil prices in southeast Asia remain elevated due to lower production and stock levels, prompting a shift to cheaper alternatives like soybean oil in key markets such as India.

Meanwhile, palm oil prices in southeast Asia remain elevated due to lower production and stock levels, prompting a shift to cheaper alternatives like soybean oil in key markets such as India.

Consequently, downstream fatty alcohols prices increased. Although plants in Malaysia and Indonesia have expanded capacities, these will be offset by expected turnarounds during March to May.

BEARISH SENTIMENT AMID TRADE WARS
Industry players are navigating highly volatile markets amid the revival of the US-China trade war, with fears of a more widespread trade disruption amid the US’ protectionist measures under President Donald Trump.

Buyers are generally cautious about building too much inventory amid continued weakness in demand.

In the MX market, buyers in southeast Asia are maintaining sufficient inventories and avoiding additional spot purchases.

For methyl methacrylate (MMA), domestic market in China remains sluggish due to high stocks and lackluster demand, while a strong US dollar was further dampening export demand.

Similarly, the vinyl acetate monomer (VAM) market is also facing weak demand in China, with traders struggling to offload high inventories due to slow spot trade activity.

US’ tariffs on all steel and aluminum imports which took effect on 12 March are adding to regional economic concern, particularly for South Korea, which is as major steel exporter to the world’s biggest economy.

China, whose economy has been slowing down, plans “promote reasonable wage growth by strengthening employment support in response to economic conditions”, to boost domestic consumption, its State Council said on 16 March.

Among the new economic stimulus measures are implementing paid annual leaves for workers, expanding property income channels and accelerating development in new technologies.

Focus article by Jonathan Yee

Additional reporting by Jasmine Khoo, Angeline Soh, Samuel Wong, Isaac Tan, Chris Qi, Helen Yan, Rita Wang, Elaine Zhang, Yvonne Shi, Li Peng Seng and Joanne Wang

Thumbnail image: Qingdao Port Trade, China – 13 March 2025 (Costfoto/NurPhoto/Shutterstock)