The Urethane Blog

China Update

INSIGHT: China petrochemical demand stays weak; supply to increase near term

Author: Yvonne Shi


SINGAPORE (ICIS)–China’s overall petrochemical demand has weakened in July while supply is projected to increase, dimming the market outlook in the near term.

Inventories of major chemicals such as benzene, polyolefins, ethylene glycol, acetone and toluene all posted increases in the week ended 17 July, according to ICIS data.

Softer demand was reflected in spot market prices as tracked by the ICIS China Petrochemical Index. The index fell to 877 on 17 July, down from 898 on 8 July, and lower than the June average of 888.6.

The index tracks movement of domestic prices of a wide array of organic and plastics products, including methanol, purified terephthalic acid (PTA), polypropylene (PP), polyethylene (PE), monoethylene glycol (MEG), mixed xylene, benzene, toluene, acetic acid, styrene, phenol, acrylonitrile, acetone, n-butanol, 2-ethylhexanol (2-EH), acrylic esters and propylene oxide (PO).

Spot petrochemical purchases have slowed down due to a combination of recent price spikes, high stocks and poor end-demand.

For propylene oxide (PO), recent market gains have driven up prices of downstream polyether polyols, whose producers have had to struggle with limited margins due to inability to fully pass on increased costs to end-users.

Downstream sectors, such as automobile, furniture and fabrics, are still in the process of a slow recovery.

Producers of polybutylene terephtalate (PBT) – downstream of butanediol (BDO) – may have to reduce output, with end-users holding sufficient inventories less willing to purchase raw materials at increased prices.

For purified terephthalic acid (PTA), limited exports of downstream clothing and textiles hamper market gains although downstream polyester plants are running at high rates.

PTA inventory among producers and downstream end-users alike has remained high, while the government is trying to help out exporting companies survive by re-directing their products to the domestic market.

Polyolefin downstream manufacturers, meanwhile, are also currently holding large inventories of raw materials and products.

Buying of polypropylene (PP) turned more cautious after recent price gains, while some small downstream factories have halted operations due to high feedstock costs.

Demand for bisphenol-A (BPA) was hit as downstream polycarbonate (PC) producers cut output following heavy losses caused by poor end-demand and high feedstock prices.

Scheduled turnarounds at another major downstream – liquid epoxy resins (LER) – will also further weaken demand for BPA. The LER market, nonetheless, is relatively healthy on the back of government’s subsidy on its downstream wind power industry.

Petrochemical end-users in general are also hesitant to buy as new capacity coming on stream will boost domestic supply in the third quarter.

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