Weak consumer confidence and economic pressures are expected to weigh on the price outlook for Asia petrochemicals.

Diverse price trends are expected in the olefins and aromatic value chains according to ICIS petrochemical analysts. And among the 31 petrochemical commodities covered by the ICIS Asia Price Forecast, butadiene (BD), methanol and butyl acrylate are expected to lead the downward trend along with polyolefin product prices.

Aromatics prices are forecast to increase with the strongest gains in polyethylene terephthalate (PET) bottle grade resin, purified terephthalic acid (PTA), and paraxylene (PX). An uptrend in benzene and styrene prices is seen.

Weak end use demand

China retail sales for passenger cars were 0.3% higher in March from a year earlier, according to data published by the China Passenger Car Association (CPCA). But sales in the first three months of 2023, were 13.4% down year on year at 4.33m units.

In the midst of such uncertain end use demand there has been limited buying interest for petrochemicals. However, some downstream buyers have chosen to secure deep-sea parcels for April/May arrival, of BD for example, considering the heavy maintenance schedule of steam crackers in Q2. This is expected to bring more balanced supply-demand fundamentals to the Asia petrochemical market in Q2 despite the heavy turnaround schedule.

Apart from weak demand, abundant supply also results in a downward movement for PE prices in April. The restart of production units in the Middle East and the start-up of new plants in Asia have led to increasing supply on the Asia market.

Meanwhile, lower gas and coal prices are the main reasons for a lower methanol price outlook.

Natural gas prices continue to moderate on unseasonably warmer weather and inventory levels and are expected to remain subdued ahead of the summer. This has encouraged methanol production in the US, where natural gas costs are currently at their lowest level since Q3 2020. Some volumes are expected to come to Asia in the coming months.

Stable-to-soft Chinese coal prices are also expected. Methanol cash costs in Inner Mongolia are estimated to be down 8% in early April compared with one month ago. Meanwhile, the pick-up in methanol demand is slower than expectations. A seasonal improvement may be possible in the Spring for formaldehyde, but meaningful demand growth is not likely to occur until Q3 at the earliest.

The restart of idled methanol to olefins (MTO) units is becoming adaptable amid the slow demand for olefins and olefin derivatives, as well as stable-to-soft olefins prices, despite positive margins.

For butyl acrylate, a sharp decrease in prices in March was caused by weaker than expected demand. Although a moderate uptrend in prices is expected during April, considering recent unexpected outages, continuous tepid demand and low starting price points since early in the month will result in a lower average price compared with March.

Gasoline supports aromatics

Even though aromatics products are facing a similar weak end-use demand scenario, continuous strong demand from the US gasoline market still support prices, especially amid the peak maintenance season in Asia.

US gasoline stocks remain at historically low levels for this time of year.

Healthy demand for octane components will curtail feedstock availability for petrochemicals and, therefore, run rates at existing Asian PX facilities. Meanwhile, even some PX is being exported from northeast Asia countries to the US for gasoline blending. This should lead to tight Asia PX supply in April.

In addition, the maintenance peak in Q2 in Asia will also support PX prices to rise further. The capacity loss in Asia in Q2 will total around 1.29m tonnes, almost doubled compared with Q1.

The peak maintenance season will support the Asia benzene market as well. Considering the requirement from new capacities for the styrene industry, China benzene port inventories are expected to drop in April. This should result in bullish market sentiment during the month.

Styrene and PTA prices are supported accordingly due to higher feedstock prices. However, their price uptrend cannot be fully transferred to most of their derivatives, including expandable polystyrene (EPS), polystyrene (PS), acrylonitrile butadiene styrene (ABS) and partially oriented polyester yarn (POY).

Nevertheless, PET bottle grade resin may be the only star. Its supply and demand fundamentals remain healthy. This is mainly because of continuous stable export demand to western markets, combined with increasing beverage demand in the local Chinese domestic market. China total PET resin exports increased by 27% in the first two months of 2023. ICIS expects this trend to continue at least in Q2.

The European Commission has initiated an anti-dumping investigation on Chinese PET cargoes, and this has put some bearish sentiment on the market. ■