China Market Update
China April petrochemical market down again after short-lived increase
Author: Yvonne Shi
SINGAPORE (ICIS)–Petrochemical prices in China first rose and later slumped in April tracking the curve of crude oil futures and as the country resumed operations after a pandemic-related lock down.
The increase in demand for polypropylene (pp) fibre that is used in production of protective masks and some speculation pushed up PP and the entire polyolefin sector in the index.
It was followed by a wave of price increases for upstream propylene and related products, and relatively stable oil prices during this period leading to a short-lived climb within the index.
Fibre prices fell when government stopped scattered production of low quality melt-blown non woven fabric in Jiangsu that consumed and wasted a lot of PP fibre.
Polyolefin prices as well as those of a series of other upstream and related products plunged rapidly, superimposing the decline in crude oil and sending the index downward.
In April, China’s domestic petrochemical products showed obvious divergence in price trends.
Products related to fibre and propylene had a quick drop after rising. Some products showed continuous downward trend, while individual products climbed up on the back of strong demand.
The demand for mask-making fibre and following speculations pushed up polypropylene, propylene, and other downstream products of propylene such as propylene oxide, acrylic acid and esters, and n-butanol.
It is not the actual demand that supported price increases but it was market players attempt to get prices increased, which was destined to be unsustainable.
Take acrylic acid and esters as examples, market confidence remains insufficient because the demand has not yet remarkably recovered.
Markets affected by both abundant supply and weak demand, such as vinyl acetate and PTA (purified terephthalic acid), continued to fall out of the curve despite overall rebound in early April.
On the one hand, the supply pressure continued due to high operation rate amid low feedstock, or the increase in imports.
On the other hand, export demand was hammered with the fallout of coronavirus pandemic spreading across the globe.
Although some markets did not see sharp price falls, demand expectations remain bleak.
Such as BDO (butanediol), because its down streams are mainly in the textile industry, regardless of domestic or overseas, demand is expected to stay weak.
Acetone stands out in the twists and turns in April.
Demand for products that go into making disinfectants increased during the pandemic.
China’s domestic and export market demand for IPA (isopropanol) that goes into making of hand sanitisers increased notably, directly benefiting the upstream acetone.
According to ICIS data, as of April 24, China’s acetone inventory fell to the level of before coronavirus outbreak, and its price rose by nearly half.
But overall, recovery of end users’ demand in China’s petrochemical markets has yet to turn optimistic.
Most market players expect demand to just stay stable in short term.
As the world continues to face shrinking demand amid growing pandemic, Chinese market cannot stay unaffected.
Even for the most eye-catching acetone market at present, except for strong IPA, very few downstream sectors have seen increased operation.
May Day holiday travel is expected to give some support to the refined oil products demand.
Analysis by Yvonne Shi