asia chemicals outlook - amazon s3€¦ · asia chemicals outlook 2 18 key markets covered: acids...

ASIACHEMICALSOUTLOOK

2 18Key markets covered:

Acids AlcoholsAromatics Base Oils

Chloralkali Feedstocks/Intermediates Fibre chain Olefins

Oleochemicals/SurfactantsPlastics/Polymers Polyurethane ChainRubber

SolventsAnd so much more...

QUICK NAVIGATIONACIDS• Acetic Acid• Adipic Acid (ADA)

ALCOHOLS• Ethanol• Ethanolomines• Methanol• Oxo-alcohols

AROMATICS & DERIVATES• Benzene• Paraxylene• Styrene Monomer• Toluene• Xylene

BASE OILS• Base oils

CHLORALKALI• Caustic Soda

FEEDSTOCKS & INTERMEDIATES•

Maleic Anhydride (MA)• Methyl Methacrylate (MMA)• Polymethyl Methacrylate (PMMA)• Titanium Dioxide• Vinyl Acetate Monomer (VAM)

FIBRE CHAIN• Acrylonitrile• Caprolactam• Monoethylene Glycol (MEG)• Polyethylene Terephalate (PET)• Purified Terephalatic Acid (PTA)

OLEFINS• Butadiene• Ethylene• Propylene

OLEOCHEMICALS & SURFACTANTS• Fatty acids• Fatty Alcohol Ethoxylates (FAE)• Linear Alkylbenzene/ Sulphonate

(LAB/ LAS)

PLASTICS & POLYMERS• Polyethylene (PE)• Polypropylene (PP)• Polycarbonate• Polystyrene• Expandable Polystyrene (EPS)• Polyvinyl Chloride (PVC)• Plasticizers• Polybutylene Terephthalate (PBT) and

Butanediol (BDO)

POLYURETHANE CHAIN• Polymeric Methyl Di-p-phenylene

Isocyanate & Methyl Di-p-phenyleneIsocyanate (MDI & PMDI)

• Toluene Di-Isocyanate (TDI)

RUBBER• Acrylonitrile Butadiene Styrene & StyreneAcrylonitrile

• Styrene Butadiene Rubber (SBR)

SOLVENTS• Acetone• Bisphenol-A (BPA)• Ethyl Acetate• IPA & MEK• MTBE• Phenol

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INDUSTRY NEWSReact quickly to market changes and developments by being the first to receive breaking news and analyses across the global petrochemical markets. Our market-moving news articles cover production updates, plant capacities, output and shutdowns, plus so much more.

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ASIA’S ACETIC ACID MARKET TO BE DRIVEN BY DEMAND GROWTHBy Helen Lee

Asia’s acetic acid market in 2018 is widely expected to be driven by downstream demand growth namely in the purified terephthalic acid (PTA) and acetic anhydride sectors while the lack of new acetic acid plant capacities kept producers’ sentiment optimistic.

Despite a lighter schedule of acetic acid plant turnarounds in 2018 compared with 2017, market players generally anticipate prices to be supported by organic downstream demand growth, barring any unforeseen acetic acid plant outages as seen in 2017.

Some market players also anticipated improved plant operating rates in the downstream ethyl acetate sector in China in 2018 to drive demand for acetic acid. This followed measures from the government such as the imposition of penalties from the environmental impact inspections.

Other government-led measures – namely China’s plan to blend renewable fuels such as ethanol into its gasoline supply by 2020 - will also incentivise previously idled acetic-to-ethanol integrated producers to restarttheir plants.

In 2013, Celanese commissioned a 275,000 tonne/year ethanol plant in Nanjing, which uses its patented TCX technology that turns natural gas or coal into ethanol by using acetic acid as an intermediary. Although the plant was idled since early 2017 due to unfavourable margins, the restart of the plant would curtail the merchant acetic acid volumes.

Meanwhile, the demand outlook in the downstream ethyl acetate/butyl acetate sector was mixed, with buoyant demand expected in southeast Asia, with an increase in plant capacity by 2021 or 2022.

On the other hand, the difficulty in passing on hefty hikes in acetic acid feedstock costs - as was the case in the latter half

Asia Acetic acid plant turnaround 2018-2019

ACIDSACETIC ACID

Back to Quick Navigation | 03Copyright 2018 Reed Business Information Ltd. ICIS is a member of RBI is part of RELX Group plc. ICIS accepts no liability for commercial decisions based on the content of this report. Content published between December 2017 to January 2018.

Meanwhile, confirmed new acetic acid capacities in 2018 are limited to relatively small plants located in Iran and India.

In the downstream purified terephthalic acid (PTA) sector, the following new and idled PTA plants are expected to start up or restart in the fourth quarter of 2017.

Source: ICIS

Source: ICIS

Source: ICIS

of 2017 - may prompt some ethyl acetate/butyl acetate producers to adjust their plant operating rates in 2018, some market players added.

This came on the back of an extended price rally in the latter half of 2017 which caught market players off guard, as the much anticipated price corrections after the completion of the heavy schedule of acetic acid plant shutdowns in the second quarter failed to materialise as a string of unexpected events affecting supply unfolded.

China’s Shanghai Wujing – a key exporting producer – experienced a prolonged plant outage from mid-July to mid-October due to mechanical issues.

Over in the US, Hurricane Harvey – which made landfall on 25 August over eastern Texas – knocked out chemical plants and refineries on the Gulf Coast.

Just when the market was in the process of recovering from the aftermath of Hurricane Harvey’s impact on global acetic acid supply, Eastman’s plant experienced an explosion on 4 October, which led to a global scramble for acetic acid in November and December.

Coincidentally, the supply imbalance had also deteriorated in China in December due to curtailed production at several plants located in Tianjin, Chongqing and Jiangsu, as the effects of the government’s policies to combat pollution affected the supply of

feedstocks such as carbon monoxide.

Spot prices across Asia subsequently hit their highest levels last seen in May 2011 and looks set to start 2018 on a high.

Looking further ahead, demand growth would also stem from the downstream acetic anhydride sector.

India’s Jubilant Life Sciences plans to bring onstream a 50,000 tonne/year acetic anhydride project in 2019. This would translate to an additional requirement of 65,000 tonnes/year of acetic acid. Construction however, has yet to kick off.

New capacities in the PTA sector are also being planned in China (please see below).


Source: ICIS

ASIA ADIPIC ACID MAY FLUCTUATE IN NARROW RANGE IN EARLY ’18By Judith Wang

Asia adipic acid (ADA) prices may fluctuate within a narrow range in January 2018 amid a lack of clear market drivers.

In the week ended 20 December, prices for China-origin cargoes were assessed at $1,430-1,450/tonne CFR (cost and freight) NE (northeast) Asia; while those from other origins closed at $1,580-1,600/tonne CFR NE Asia, unchanged from the start of the month, according to ICIS.

There is not much room for ADA prices to go up sharply given rising capacity in China and slowing demand with the approach of the Lunar New Year holiday.

Major Chinese producer Chongqing Huafon Chemical is conducting trial runs at its third new 180,000 tonne/year unit, with commercial operations likely to kick off early in 2018, a company source said.

“New capacity in China will weigh on the market sentiment, as buyers and end-users

are not rushing to build stocks given the ample supply,” a northeast Asian end-user said.

Downstream demand typically softens at the end of the year and this condition

may persist in January as some small downstream plants may shut down ahead of the Lunar New Year holiday.

The Lunar New Year, which falls on 16 February 2018, is celebrated in most parts

ACIDSADIPIC ACID (ADA)


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of northeast and southeast Asia. China will be on a week-long holiday on 15-21 February 2018.

ADA prices, however, are firmly supported by strong feedstock cost, as well as balanced-to-short supply.

Prices of feedstock benzene have increased above $900/tonne FOB (free on board) China in the week ended 15 December, from around $800/tonne FOB Korea in early November. And the price may remain firm in January amid healthy demand, market sources said.

“We are considering to raise [ADA] prices if feedstock prices continue to rise, although we are also concerned that further price rise may dampen the buying interest,” a major producer said.

Supply of ADA in China was balanced to short amid the ongoing plant shutdowns, coupled with reduced operations at some plants.

Major Chinese producer Shandong Haili has kept its 75,000 tonne/year ADA line in Shandong province off line following a fire at one of its tanks in early December, with no fixed restart date.

Tangshan Zhonghao, meanwhile, is running its 150,000 tonne/year unit in Hebei province at 70% of capacity due to strict environment inspections of factories by the local government.

Henan Shenma was also operating its two plants with a total capacity of 400,000 tonne/year at reduced rates of 90% due to shortage of feedstock natural gas.

“The ADA prices did not change much in the past few weeks and may not move too much in coming weeks amid the holiday sentiment,” a northeast Asian end-user said.


SE ASIA DEMAND FOR ANHYDROUS FUEL ETHANOL LIKELY TO SLOWBy Izham Ahmad

Demand for fuel grade anhydrous ethanol in southeast (SE) Asia is expected to slow in the early months of 2018 amid increasing supply from the US but prices could find some support from arbitrage opportunities expected to be available in China.

The Philippines is the main southeast Asian destination for US fuel-grade anhydrous ethanol, which is used to blend with gasoline to meet the country’s biofuel blending requirements.

In 2017, anhydrous ethanol import prices in southeast Asia, specifically the Philippines, touched a high of $527/cbm (cubic metres) in April as strong demand for US material in Brazil caused a shortage in supply for Asian markets.

Prices however began to retreat after that and the decline accelerated in the final quarter of the year after Brazil introduced a quota system to limit imports of US ethanol and protect its domestic ethanol industry.

In December, anhydrous ethanol prices fell to a low of $441/cbm CFR (cost & freight) SE Asia (Philippines), the lowest prices on record since ICIS began tracking the data in January 2011.

That tracked a downtrend in US ethanol futures prices traded on the Chicago Board of Trade (CBOT) during that week as most market players anticipated slower demand amid expectations of higher ethanol supply.

Brazil’s Chamber of Foreign Trade (Camex) in late August approved a 20% tax on ethanol imports, which will be levied only after a tax-free quota of 600m litres/year is surpassed. The tax will be in place for two years, and after that will be re-evaluated.

In Brazil, the ethanol-use mandate has been mandatory since 1977 when the legislation required a 4.5% blend of anhydrous ethanol to gasoline. According to

ALCOHOLSETHANOL

the legislation, the ethanol blend can vary from 18% to 27.5% and it is currently set at 27% (E27).

On the supply side, US production is expected to be strong in 2018. In December, the US Department of Agriculture (USDA) said in its World Agricultural Supply and Demand Estimate (WASDE) report it expected US ending stocks of corn to be lower because more of the grain could be used to make ethanol.

Annual US ethanol production stood at around 15.9bn gal in 2017, a figure expected to grow to 17bn gal by the end of 2018, the ethanol trade group Renewable Fuels Association (RFA) said.

But demand in the Philippines in the first few months of 2018 is not expected to be significantly higher due to its domestic local ethanol allocation program.

The program requires local fuel distributors to purchase a fixed monthly amount of ethanol from domestic producers before they can purchase imported material.

Under the LMA for the first quarter of 2018,

the Department of Energy (DOE) set a total allocation of 75,790 cubic metres (cbm) of locally-produced ethanol, an increase of 7,040 cbm, or 10.2%, from the fourth-quarter 2017 allocation.

The higher allocation meant that Philippines demand for fuel-grade ethanol imports were expected to be lower in the first quarter of the year.

On the fundamental level, corn prices in the US are also expected to play an important role in ethanol prices in 2018 amid expectations of record crop yields.

But elsewhere in Asia, arbitrage opportunities are expected to offer a glimmer of hope, due to rising prices of domestic ethanol in China.

In 2017, China’s National Energy Administration (NEA) announced plans to expand the use of ethanol gasoline in vehicles and targets to achieve a national coverage of the biofuel by 2020.

The E10 gasoline blend, which contains 10% of ethanol, has been in use in 11 provinces and is mandatory in six provinces


in China. But market sources said China may not be able to produce enough ethanol domestically to meet those targets and hence may need to import fuel-grade ethanol from the US.

Additionally, ethanol prices in China have skyrocketed in recent months, making US

imports competitive despite the country imposing a 30% import duty on US material since January 2017.

In China, etac prices have also hit six-year highs and are expected to remain stable to firm in 2018 due also to the rising costs of feedstock ethanol.

However, latest official data out of the US so far have shown no exports of fuel ethanol to China from January to October 2017. Market sources in Asia said US cargoes bound for China would have been loaded on vessels in November.

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ASIA ETHANOLAMINES SEEN BUOYED BY UPSTREAM, SHORT SUPPLY IN Q1By Kheng Wee Loy

Asia ethanolamines markets could be buoyed by strong upstream ethylene and ethylene oxide (EO) values, as well as short supply, in the first quarter of 2018.

Recent spot prices of monoethanolamines (MEA), diethanolamines (DEA) and triethanolamines (TEA) for drummed cargoes have been on the rise across Asia on the back of rising feedstock prices.

MEA import prices in China were at $1,175/tonne CIF (cost, insurance & freight) China on 20 December, 31% higher than the $900/tonne CIF China seen in July.

Domestically, spot prices were at yuan (CNY) 11,100/tonne EXWH (ex-warehouse) in late December, compared with the CNY 8,550/tonne EXWH in July, ICIS data showed.

Likewise for India, MEA prices were assessed at $1,265/tonne CIF India on 20 December, marking a 17% climb from the half-year low of $1,080/tonne CIF India in early August, according to ICIS data.

In southeast (SE) Asia, MEA prices rose 13% to $1,280/tonne CIF SE Asia on 20 December, from the half-year low of $1,135/tonne CIF SE Asia in July, according to ICIS data.

These increases tracked strong gains in upstream markets such as ethylene and EO since the July period.

Ethylene spot prices increased to $1,335/tonne CFR NE Asia on 15 December, around $400/tonne higher than the prices for the same region in late June, according to ICIS data.

Downstream EO prices remained at an 8-month high of CNY 10,600-10,800/tonne EXWH, according to data compiled by ICIS on 20 December. Between March and October, spot EO were transacted at lower

prices in the range of CNY 8,600-9,800/tonne EXWH, according to ICIS data.

Amid the EO supply tightness and a healthy demand for other EO derivatives, sellers and buyers were of the view that amines supply could stay restricted in early 2018 especially if feedstock costs climb further.

Additionally, some recent planned shutdowns and unplanned outages, as well as low operating rates in the region may pose as challenges for various ethanolamines market players in the new year.

ALCOHOLSETHANOLAMINES


Producers expect to focus on fulfilling backlogs and current orders, and increasing inventory levels for the time being. On the buying side, consumers may find it slightly harder to secure spot volumes in the near term.

Sadara’s new plant in the Middle East should provide some gradual downward pressure on the market, sources said.

New volumes have been transacted in Asia, especially in the northeast, according to market players.

Some sources expected to see some impact on spot prices in late 2017 following the plant’s start-up but said that the actual impact seemed to be limited thus far.

Separately, the more balanced situation in Europe may indirectly weigh down global spot prices in time to come, following Dow’s lifting of its force majeure on ethanolamines in early November.

On the other hand, overall buying interest is likely to be stable in Asia, although there may be fluctuations prior to holidays, such as the Lunar New Year break in February.

“I would probably continue getting similar amounts as before, to cater to my customers’ orders,” a buyer in southeast Asia said.

“Demand should be reasonable in early 2018, given that buying activity was quite strong in December, a time [at which] we normally expect the market to be quieter,” a trader in northeast Asia said.

Meanwhile, certain factors may cause the amines markets to remain slightly stifled in 2018, some participants said.

In China, an anti-dumping duty (ADD) investigation commenced in early November and is expected to last for about

a year. The probe is understood to be conducted on imports from Malaysia, Saudi Arabia, Thailand and the US.

In India, the local currency ban and implementation of the Goods and Services Tax (GST) could keep buying interest weak, amid cautious market sentiment.

Ethanolamines are used to make personal care and household products, detergents and herbicides.

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ASIAN METHANOL SENTIMENT MIXED OVER UPCOMING CAPACITIES AND SHORT-TERM SUPPLY TIGHTNESSBy Kite Chong

In Asia, buyers and end-users are bearish on methanol market while producers and sellers have mixed sentiment for this year.

At this point a year ago, methanol market players were bullish for 2017, citing then-recent new developments in the Chinese methanol-to-olefin (MTO) industry, which resulted in firmer contracts signed for 2017 compared to 2016 in most Asian markets.

By the end of 2017, it could be seen that market players’ initial predictions had come true: import spot prices in the key China market for 2016 were at a range of $201.50-352.50/tonne CFR China against a 2017 range of $260-379/tonne CFR China as of 24 November 2017.

But a reversal in sentiments can be seen throughout the Asia market.

All players have their eyes on three new methanol plants that are widely expected to come on line in 2018:

Natgasoline LLC in the US with a nameplate capacity of 1.75m tonnes/year, and Kaveh Methanol Company and Marjan Methanol Project in Iran, with nameplate capacities of approximately 2.5m tonnes/year and 1.8m tonnes/year respectively.

Although all three plants were widely expected to come on line in 2018, specific timelines were less clear: Natgasoline LLC should come on line in March 2018, while the two Iranian plants could come online by end Q1 to early Q2.

However, there were also market players who believed that the Natgasoline LLC plant will only come on line in early Q3 2018, and the two Iranian plants in Q4 2018.

Adding to the confusion caused by the differing sentiments was the supply

ALCOHOLSMETHANOL

tightening that had been plaguing the Asian market since Q2 2017.

This was caused by a few unscheduled shutdowns in the Middle East and southeast Asia, as well as delayed restart from turnarounds for a couple of southeast Asian plants.

Spot deals closed on a formula-linked basis were heard at some of their highest levels in 2017, and some market participants pointed out that sellers were unlikely to accept term prices that were much lower than prevailing spot numbers.

As a result, Asian players described 2018 term discussions to be much slower compared to 2017, attributing this to a wide buy-sell gap.

Producers and sellers targeted a rollover or a small softening in contracts but buyers aimed for a large drop in term figures.

Overall, the general consensus was that term figures would likely drop slightly for 2018 in most parts of northeast Asia such as China, South Korea and Taiwan.

In southeast Asia, term figures were expected to climb slightly, largely due to higher costs on the producers’ side.

While buyers initially hoped to achieve a rollover or softer contracts, market participants stated that it was unlikely to happen as southeast Asia buyers had already obtained very attractive 2017 contracts compared to the rest of Asia.

In India, most players have not started 2018 term discussions yet, due to their financial year ending in March.

However, Indian buyers were similarly bearish, as approximately 80% of their annual imports came from Iranian sources.

On the demand side, market players did not expect any significant increase that would have an impact on market dynamics.

While there will continue to be new downstream capacities coming on line in China throughout this year, especially in the MTO industry, consumption from these plants will be somewhat offset by new methanol capacities in China too.


It was projected that there could be as much as 6m tonnes/year of new nameplate capacities coming on line, although realistically this might only result in 3m tonnes of annual production.

In the spot market, market players expected

prices to fluctuate around the present levels for Q1 2018 as the on-going supply tightness has spilled over in the new year, before softening in Q2 2018.

However, some market players raised the possibility of production disruptions in Iran

in Q1 2018, caused by winter, which could exacerbate the tight supply situation.

Spot prices should continue to soften in the second half of 2018, although this depends on when the new capacities will come online.

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ASIA OXO-ALCOHOLS MARKETS TO SEE MIXED FORTUNES IN Q1By Joson Ng

Northeast Asia’s oxo-alcohols markets may see N-butanol (NBA) and 2-ethylhexanol (2-EH) heading in different directions at the start of the year.

NBA spot prices have been on a steady downtrend since the start of October 2017 on weak sentiments in China.

NBA in northeast Asia fell by some $75/tonne on average in the cost and freight (CFR) northeast (NE) Asia spot market from early October to early November, according to ICIS data and with no positive news to spur the market, the bearish sentiment prevails.

“We do not foresee too much change in terms of market fundamentals (for NBA and its downstream), I guess it would depend on crude oil prices,” said one buyer.

There was, however, a sliver-lining as supply tightened at the end of the year following a brief outage at one Asian producer’s unit.

Even as things are not strong on the NBA front, 2-EH producers have more reasons to be a little more optimistic about the start of 2018.

In Q4 2017, while NBA spot prices were heading down, 2-EH was comparatively stable as spot supply was limited in the region.

Spot prices of 2-EH in east Asia was at $1,010/tonne CFR East Asia on average from the start of September until November and gained slightly after that.

ALCOHOLSOXO-ALCOHOLS

With one northeast Asian producer on turnaround currently, the market was enjoying some support. The unit is expected to restart some time in second half to end-January

In addition, KH Neochem could begin shutdown procedure at its 120,000 tonne/year 2-EH plant in Yokkaichi, Japan sometime in mid-February for a regular turnaround. The turnaround could stretch into Q2 2018.

With feedstock propylene prices not expected to see too much fluctuations in the northeast Asia import markets, attention was channelled to downstream demand for oxo-alcohols.

The dioctyl-phthalate (DOP) spot market rose about 8.2% from the start of the year until early November in 2017.

The dioctyl phthalate (DOP) spot market rose about 11.2% from the start of the year until end-December in 2017.

The average spot price was $1,120/tonne CFR East Asia on 22 December.

There were sharp increases in 2017 when units in China were shut for various turnarounds and environmental checks fuelling expectations that the year 2018 could see similar uptrend in the middle part of the year.

That said, DOP prices are expected to start the year from a lower level as the end of the year is traditionally a weak demand season for DOP.

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CHINA BENZENE IMPORT DEMAND MAY EXCEED 3M TONNESBy Clive Ong

China’s benzene imports in 2018 could exceed 3m tonnes, which represent a more moderate growth compared with the projected increase of over 50% in 2017, market players said.

The country is a key import market for benzene in Asia.

China’s benzene imports for 2017 are projected to hit 2.5m tonnes compared with around 1.6m tonnes in 2016, largely due to start-ups of several new downstream plants.

Growth in downstream capacity is expected to continue in 2018, although at a slower pace.

Contract settlements for 2018 so far seemed to point largely to a rollover with discounts/premium showing only small changes to 2017’s level. Buyers’ desire to secure significantly larger discounts appeared to have been met with limited success.

The anti-dumping (ADD) investigations on key downstream styrene monomer (SM) sector continued to be closely watched by benzene players.

With China’s overall demand of nearly 10m tonnes of SM per year and importing more than 3m tonnes annually, any ADD levied on key suppliers of SM to China might affect the current trade flow of SM in the region, which in turn might impact the balance of benzene across the region.

South Korea remained the largest supplier of SM to China, with more than 1m tonnes shipped each year.

However, increasing demand for benzene in China will be little affected as the country is slated to add SM capacities through to 2021.

AROMATICS & DERIVATIVESBENZENE

Meanwhile, the Asian benzene market closed 2017 on an upbeat note, with spot prices hovering at around the mid-to-high $800/tonne FOB (free on board) Korea levels at year end, up from the low-$700/tonne FOB Korea levels in the middle of the year.

However, a significant part of the run-up in the fourth quarter could be attributed to strong performance in the US market post-Hurricane Harvey due to supply issues. Since Asian countries such as South Korea and Japan ship regular quantities to the US gulf, higher prices in the US market lifted


Asian numbers.

The opening of the east-west arbitrage in the fourth quarter helped to alleviate the supply overhang in the region.

Inventories along eastern China rose to around 150,000 tonnes in the second half of September and hovered around this level in the fourth quarter.

Some market participants previously expected the stock level in eastern

China to climb since buying impetus for import cargoes were soft. However, the emergence of the opportunity to ship to the US has helped to cap the growth in shore tank inventories in China.

However, with run rates at refineries over in the US getting back to normality, elevated prices in the US Gulf could ease in the weeks ahead in early 2018. Delays of shipments from Europe also caused prices to increase in the fourth quarter.

This is not to suggest that demand for benzene in China was weak. Decent performance in the downstream sectors like styrene, phenol, adipic acid, caprolactam. kept consumption of benzene strong. However, users of benzene often chose to purchase locally as domestic cargoes are typically cheaper than imports.

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ASIA PX MARKET TO BE ROBUST IN Q1 ON DOWNSTREAM PTA RUN RATESBy Hazel Goh

Asia paraxylene (PX) market is expected to be robust on the back of higher run rates in the downstream purified terephthalic acid (PTA) plants in the first half of this year.

However, PX market will hinge on the balance between new PX commercial capacities and run rates of downstream purified terephthalic acid (PTA).

In the fourth quarter (Q4) in 2017, some idled downstream PTA capacities restarted and a couple of new PTA plants started up, that will bring about more PX demand in the first quarter (Q1) 2018.

Oriental Petrochemical Taiwan Co (OPTC) started up its Line 3 PTA unit of 1.5m tonne/year capacity in Kuanyin, Taiwan in November, and Jiaxing Petrochemical started up its No 2 2.2m tonne/year in Jiaxing, Zhejiang, China in December.

Idled PTA capacities in China of 3m tonnes/year under Xianglu Petrochemical and 600,000 tonnes/year by Hanbang Petrochemical were restarted in November and December, respectively, and have ramped up to full operating rates.

PTA market conditions were favourable for its producers in the fourth quarter of last year to run their plants at high rates amid tight supply in China and improved PX-PTA spread in the fourth quarter as compared to most of the rest of 2017.

PX-PTA spread improved from below the $90/tonne mark at the start of the fourth quarter 2017 to over $110/tonne at the end of the quarter.

It will take time for PTA inventories to build up, if at all, hence run rates of PTA plants will likely remain on the high side supporting PX demand in Q1 2018.

On the PX supply side, the new capacities under Nghi Son Refinery and Petrochemical

AROMATICS & DERIVATIVESPARAXYLENE

and PetroRabigh II were heard to be looking at starting up in Q1 2018 and in the second half (H2) of 2018 according to market sources.

Market participants expect commercial PX volumes from the new capacities to only impact the market in H2 2018.

Although PX plant planned maintenances in Q1 2018 do not seem as concentrated as that for maintenances in Q4 2018, the reduced loss of PX production to maintenance in Q1 2018 will be insufficient to cover the expected more PX demand from PTA downstream.

Hence, the Asia PX market is looking to tighten in Q1 2018.

There will be a high concentration of planned maintenances for PX plants in the second quarter (Q2) of 2018, which will likely keep PX supply on the tight side.

Supply will likely lengthen later in the year once there are commercial PX production from the new plants entering the market.

Also, it remains to be seen if further downstream polyester market situation and PTA market conditions after Q1 will be able to sustain high operating rates of PTA capacities later into the year.

Market players are generally cautiously bullish for downstream polyester market demand to be relatively good, though perhaps not as good as it was in 2017.

Source: ICIS


In 2017 polyester growth saw double-digit growth rates, but at least some healthy growth are expected, that will help to support the demand for raw material up the supply chain.

How the PX supply demand balance out in 2018, will also affect the PX-naphtha spread.

The PX-naphtha spread had taken a dip from the low $400s/tonne to near $300s/tonne at the start and end of 2017 respectively due to additional PX capacity in

2017 from Reliance and below expectation demand since several idled PTA plants that were expected to restart only did so much later in the year.

With the upcoming changes in the PX supply demand front expected in Q1, PX-naphtha spread may improve.

And when more changes to the PX market conditions come along later in the year with the upcoming new PX plants, the PX-naphtha spread may re-stabilise at a lower point if demand is unable to catch up.

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ASIA SM VOLATILITY TO INCREASE AMID ADD UNCERTAINTYBy Deborah Lee

Asia styrene monomer (SM) market is expected to see increased volatility over the first quarter of 2018 on the back of uncertainty over potential anti-dumping duties (ADD) to be slapped on some of the key exporters of the product to China.

The ADD has been in focus since the region’s largest importer of SM began investigations in June 2017, with the finalized result to be announced a year later, ICIS reported earlier. Preliminary results are expected in February 2018.

The ADD to be implemented by China on cargoes originating from South Korea, Taiwan and the US is making market participants brace for what could possibly be a big change in regional trade flows.

A lack of clarity over the scale of the ADD and how it will be implemented will lead to a spike in volatility in the months leading up to the final decision, market participants said.

“The ADD will have a potentially huge impact on trade flows,” said a northeast Asian trader. “There could be a lot less South Korean SM circulating in the market,” he added.

Some traders expect that if the ADD is high enough, China may import more Japanese, Middle Eastern and southeast Asian cargoes.

Most market participants were banking on a clearer idea of the ADD implementation in February, but even that was not guaranteed. Some traders were reluctant to take South Korean cargoes in January as well.

“The ADD could be applied retroactively, which will affect cargoes imported in January as well,” said another trader.

Term contract discussions for 2018 have been fettered by the lack of clarity, particularly for buyers and sellers whose

AROMATICS & DERIVATIVESSTYRENE MONOMER

cargoes are priced off a CFR (cost & freight) China basis, with stakeholders in South Korean production also holding off on discussions until the market has a clearer idea of what to expect.

Contract prices are typically settled by November and December, but many term discussions were left in limbo.

As a result, the spot market next year is likely to see an increase in liquidity as market players will not have fully covered their term requirements.

Despite the upheaval in the market caused by the impending ADD, overall supply and demand fundamentals in Asia are likely to hold steady.

Market participants shrugged off concerns of increasing production capacity in China in the near term as the bulk of the build in output will likely only take place in two to three years’ time.

China’s Qingdao Soda, for one, plans to get its 500,000 tonne/year plant up and running by the end of December. The plant was originally due to begin operations mid-2016, but has since delayed the startup multiple times.

Also expected to start up in 2018 is Anhui Hao Yuan Chemicals’s 260,000-tonne/year SM plant and Maoming Petrochemical Shihua’s SM plant in Beihai, Guangxi, with a nameplate capacity of 250,000 tonnes/year.

Zhejiang Rongsheng’s 1.2m tonne/year plant is expected to start up by the end of 2018 to early 2019.

The first quarter of the year will see a fall in arbitrage cargoes from the US.

Production in the US is expected to fall over the Q1, with several plants having scheduled their turnarounds during that period.

Source: ICIS


A number of SM plants in Europe will also be undergoing planned maintenance over the period, drawing more US cargoes to Europe.

The market is also expecting fewer cargoes to head over to the Asia Pacific as the ADD levied on cargoes from the US could potentially be very heavy, with the higher end of the range of expectations at around 50%.

Interest in cargoes loading out of the US from November has already dwindled as a result, as the move to Asia has been deemed too risky by some of the regular traders.

The fall in arbitrage cargoes will likely be offset by limited turnarounds in Asia – the overall turnaround schedule within Asia is significantly lighter than overall

maintenance planned for 2017.

Meanwhile, on the demand front, downstream manufacturing plants are expected to grow at a steady pace.

Production margins have been largely positive in 2017, with market participants expecting the spread between downstream products and feedstock SM to be positive, barring any big jump in SM prices.

SM is a liquid chemical used to make resins like polystyrene (PS) and acrylonitrile-butadiene-styrene (ABS), as well as synthetic rubbers such as styrene-butadiene-rubber (SBR) and styrene-butadiene-latex (SBL).

Inventory levels in east China have been persistently low for most part of the year, leaving ample room for stock building early

2018, particularly as ADD is expected to push both imported and domestic prices higher.

ICIS China data showed that SM inventory levels have languished well below the 100,000-tonne mark since June this year.

“I am still expecting to see more buying ahead of ADD [the ADD implementation], I think it didn’t made sense to buy too early, but perhaps closer to February,” said a SM trader.

But some were of the opinion that buyers have been preparing themselves for the upcoming ADD.

“Operating rates have been quite steady despite the slow manufacturing season in Q4,” said another trader.

“I think some buyers have been stockpiling the finished product instead,” he added.

Source: ICIS

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ASIA TOLUENE PINNED ON CHINESE DEMAND, TDP RUN RATES IN Q1By Trixie Yap

Asia’s toluene prices in the early part of 2018 will be heavily pinned on China’s import appetite during the Lunar New Year holiday period as well as downstream plant run rates in northeast Asia.

Buying appetite from China has been showing signs of improvement since end-December 2017, with importers starting to commit to January-loading parcels to stock up before the Lunar New Year holiday starts in mid-February 2018.

The limited amount of stockpiles at east China’s public shore tanks, which hit a close to historical one-year low at 48,700 tonnes on 14 December, also boosted purchases of CFR (cost & freight) China toluene. (please see charts)

Furthermore, with the import buying power strengthening since the first week of January – amid a stronger yuan against the US dollar – there was more push for more CFR China buying activity.

China is facing a domestic supply shortage in its eastern and southern regions, with several ongoing plant shutdowns (please see table below) lasting almost into end-December/early January.

Several traders and end-users in domestic China estimated at least a loss of 10,000 tonnes/month of supply from these turnarounds since end-November.

“Several small and medium-sized importers have been enquiring for January-loading cargoes at higher-than-expected bids and this is coming as a surprise to us because import demand has been weak even during the Golden Week holiday in China,” one northeast Asian trader said.

AROMATICS & DERIVATIVESTOLUENE

Source: ICIS


CFR China prices, as a result, have been on a general uptrend to reflect this surge in importing interest and overall higher discussion levels for January shipments. Prices rose by more than 4%, comparing 1 November 2017 with 22 December 2017, according to ICIS data.

However, there are still those that believe that prices are potentially overheated since early December and Chinese buying activity is likely to die down soon amid ample domestic supply.

“There is still a steady stream of product from other producers – both new and old – not having turnarounds and it balances out the lack of material from those on turnarounds,” one Chinese trader said.

Supply in domestic China has been rising, with several state-owned refiners adding capacities to their existing sites since the third quarter of 2017. (please see map and chart)

“We need to bear in mind that even with [Sinochem] Quanzhou on turnaround, we still have [CNOOC] Huizhou’s new second phase plant able to cover that shortfall on deliveries to east China, the supply consequences will be dire if all these plants run together,” one south China importer added.

This is in addition to the lack of demand for toluene coming from the gasoline blending sector, as blenders in Shandong or north China seek for other more affordable and convenient blendstocks such as mixed xylenes, MTBE, mixed aromatics and alkylated oil. Such blendstocks are readily available in the Shandong market.

Government regulations on the transportation of toluene in the local ex-tank market, which have been more strictly enforced since 2017, further exacerbated the weak demand from the gasoline market.

Source: ICIS

Source: ICIS

Source: ICIS


The downstream demand was also unchanged from the chemical sectors, of which some plants were still running at lower-than-expected run rates.

Chinese import demand aside, most market participants are also placing their bets on the ongoing burgeoning demand from the downstream TDP units – mainly within South Korea and Taiwan – to lift market sentiment and set the price direction for 2018.

Already, toluene procurement activities from end-users in these two countries have been ongoing for December and January shipments because of the wider-than-expected production spreads for converting toluene into benzene or xylenes.

The benzene-toluene spreads hit around $200/tonne in mid-December – a more than nine-month high – because of wider arbitrage opportunities for Asia-origin benzene exports to the US, overall strong downstream operating rates and later-than-expected plant start-ups in the second half of 2017.

“This situation is likely to mirror the scenario a year ago, where downstream units ran at high levels and [some] idled units were restarted to produce benzene/xylenes as well,” one southeast Asian trader said.Already, there were talks of a southeast Asian producer considering to restart its idled downstream unit for 2018 because of the better downstream spreads.

Overall, South Korea was a net importer for 2017, importing a total of 671,120 tonnes of toluene from January to November 2017 and exporting 328,750 tonnes. This was a reversal of their net exporter position in 2016, when the toluene-naphtha spreads and better-than-expected Chinese import demand limited downstream demand.

The country is likely to stay a net importer in the first quarter of 2018 as well, since there are planned supply disruptions at a key refiner’s aromatics unit from end-February to end-March amid high downstream TDP/STDP run rates.

Meanwhile, import volumes to the third key importer in northeast Asia, Taiwan, have already surpassed 130,000 tonnes from January to October 2017, up from 107,855 tonnes for the whole of 2016.

One key difference from the market situation in early 2017, however, is the alarming uncertainty in supply fundamentals in northeast Asia because of the slower-paced conclusions of domestic contracts among South Korean producers and end-users.

While several South Korean producers have confirmed their spot availability for end-January or February-loading, there are still concerns among market participants that this may change because there are still some domestic contract allocations unsettled as of early January.

“Price seems to be the key issue among the buyers and sellers, since premiums have been mixed among some producers who have sold export term cargoes, with neither parties willing to give in at the moment,” one northeast Asian producer said.

The discussion levels in domestic South Korea are within the premium range of $4-6/tonne on an FOB Korea basis to FOB Korea quotes.

Overall, pending the potential change in supply availability after confirmation of domestic contracts, most market participants believe that prices could be headed for an uptrend before the Lunar New Year holiday period.

Source: ICIS

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ASIA IX LENGTH TO PERSIST AS DEMAND STRUGGLES TO KEEP PACEBy Deborah Lee

The isomer-grade xylenes (IX) market in Asia will remain oversupplied in coming months, as downstream demand has lagged behind fresh production capacities this year.

A slew of new production capacities have added to the length in the region, with latest additions include China’s Sinopec Jinling Petrochemical’s aromatics facility in Nanjing, Jiangsu province. The facility, which started up 18 November, is able to produce 400,000 tonnes/year of xylene.

In China, two plants, one in Hainan and the other in Guangdong, are expected to start up in the second half of 2018, adding a combined capacity of 480,000 tonnes/year.

Although new capacity additions will slow in 2018, downstream demand is likely to see a significant increase. A number of downstream paraxylene (PX) plants are expected to start up over the year as well, but impact on IX will be minimal as the plants are largely fully integrated.

The surplus supply in the market, exacerbated by an unworkable arbitrage to the US, has pressured prices lower so far this year.

Spread between FOB (free on board) Korea IX and CFR (cost & freight) Japan naphtha has dwelled below the $170/tonne mark since September this year.

The break-even spread for IX is considered to be around $160-180/tonne.

Despite unprofitable margins, production is unlikely to slowdown, with some producers brushing off low spreads.

“For us, it does not matter if IX makes a profit or not, the cargoes just have to be sold,” said a producer in northeast Asia, adding that overall aromatics margins were the main focus.

AROMATICS & DERIVATIVESXYLENE

Isomer-grade xylene is produced alongside benzene and toluene, and producers tend to look at margins of the three products as a whole rather than focus on just one.

Benzene margins have been the key factor supporting aromatics production in the region, with the spread between benzene and naphtha ranging between $224.50-525/tonne so far this year.

Term contracts for 2018 have so far been concluded at lower levels compared to the previous year, a sign post of a weaker market ahead.

In Taiwan, state-owned CPC Corp, for one, has committed close to 20,000 tonnes/month in total to its term buyers at a discount of between $11-13/tonne on a FOB Korea basis, sources said. Its 2017 term cargoes were sold at a slight premium to FOB Korea prices.

Northeast Asian traders have sold the term cargoes to Taiwan’s largest buyer Formosa Chemical and Fibre Corporation at discounts of around $12/tonne on a CFR Taiwan basis, a steeper discount than 2017 contract prices of around CFR Taiwan minus $9/tonne, sources said.

Source: ICIS

Source: ICIS


With the supply overhang expected to persist in 2018, China import demand will remain in focus as a main price driver for spot cargoes.

China is an intermittent importer of IX cargoes, but has in recent months picked up a substantial volume of spot material, easing the supply overhang in Asia.

Market sources expect to see at least 30,000 tonnes of IX hit China’s shores in December.

The recent import spurt was driven by gasoline blending demand, as the disparity between domestic Chinese Yuan prices compared with imported US dollar prices was quite stark.

Further sparking buying interest in IX was the narrow spread to fellow octane booster toluene.

“Some traders will prefer to take IX over toluene for gasoline blending even if it’s a bit more expensive because IX can also

be used as feedstock for PX and OX,” a xylenes trader said, adding that toluene was also a more difficult material to handle.

But demand as a gasoline blending component also hinged on the Chinese government’s decision on the consumption tax for solvent-grade xylenes (SX), a substitute for blending.

Currently IX cargoes benefit from a lower tax rate, which shrinks the spread between IX and SX cargoes headed into China.

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asia chemicals outlook - amazon s3€¦ · asia chemicals outlook 2 18 key markets covered: acids...

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