Shandong (JLC), March 16, 2020--China’s overall chemical market was strongly hit by the turbulent economyin the world as the halt of global stocks contributed to plunges in energy andchemical markets and the global trade liquidity has slowed sharply resultingfrom worldwide virus spread.
Aromaticsindustry chain
PX: PX prices plummeted as crude futures prices slumped continually. On March 9,Asian PX prices closed by $583/mt CFR Taiwan, down $100/mt from the week endedMarch 5, with the daily drop hit a record low of 14.6%. After that, PX pricesrebounded slightly, but the overall market was weak, as downstream PTA demandwas not strong.
The PX supply was relatively tight.Sinopec Hainan Refining and Chemical postponed the restart at its 1 millionmt/year PX plant, and the restart of a 1.6 million mt/year PX unit at FujianFuhaichuang Petrochemical was uncertain.
The spread between naphtha and PXwidened slightly, as naphtha prices fell more than PX prices, but PX producersstill suffered from losses at $22.5/mt.
China’s PX imports were impactedlittle. As the two main suppliers for China’s PX, South Korea exported 6.04million mt of PX to China in 2019, accounting for 40% of China』 total importsand Japan exported 2.097 million mt of PX with a proportion of 14%.
At present, except for routineturnarounds, PX producers in South Korea and Japan maintain normal productionamid small impacts from virus outbreak as most PX units are refining andchemical complexes and the goods are mainly sold by signing term contracts.
Benzene: Asianbenzene prices dived as a result of crash in crude futures prices. On March 12,FOB South Korea prices plummeted by $90/mt from the week ended March 5 to$537-538/mt and CFR China offers retreated to $540-550/mt. In East China,benzene prices slumped to CNY4,600-4,700/mt.
China’s benzene imports from NortheastAsia and Southeast Asia dropped, and in the meantime, the imports from SouthKorea, the main supplier for China’s benzene with a proportion of more than 67%in China’s total imports, were less than 20,000 mt in early March.
In March, China’s benzene imports fromSouth Korea are expected to be less than 70,000 mt, down around 65% against205,000 mt in the corresponding period of last year, and the imports arepredicted to keep falling as the virus may drag down operating rates at benzeneplants in South Korea. In addition, downstream plants in China have not yetresumed operation completely and they become prudent affected by crash inproduct market.
Toluene and MX: China’s toluene and MX imports were impacted little. China imported the twoproducts mainly from South Korea and Japan, but its dependence on importedtoluene and MX was low. In addition, the epidemic did not impact refining andchemical industry in South Korea and Japan temporarily. Although thetransportation and discharging may be delayed and the freight rate willpossibly increase affected by the epidemic, Chinese importers』 buying interest ishigh due to opened arbitrage window as FOB South Korea toluene and MX pricesare both lower than domestic prices. Nevertheless, China’s gasoline stocks arehigh and port tank capacity of toluene and MX tightens, both dampening theimports of the two products.
In 2019, China’s toluene importstotaled 331,400 mt. Those from South Korea topped at 192,600 mt with aproportion of 58.12%, and those from Japan ranked third at 41,900 mt,accounting for 12.64%. At the same year, China imported 886,300 mt of MX intotal with 280,900 mt from South Korea and 184,800 mt from Japan, a proportionof 31.7% and 20.85%, respectively.
Phenol: China phenol market became weaker as feedstock benzene and propylene pricesplunged resulting from persistently falling crude futures prices, and thegloomy fringe market weakened traders』 buying interest.
China’s phenol imports are expected todecrease amid virus spread in South Korea and maintenance of phenol and acetoneunits at Rabigh. In 2019, China’s phenol imports from Saudi Arabia accountedfor 35% of China』 total imports and those from South Korea accounted for 25%.
Styrene: China styrene prices dived and East China market prices fluctuated in the rangeof CNY5,800-6,100/mt as of March 12, as the global virus spread triggeredturbulent financial market and price war of crude oil weakened the energy andchemical market.
China’s styrene imports suffered fromsmall impacts from the global virus spread. Port styrene stocks climbed highafter China’s Lunar New year during late January and early February due todelivery halt caused by the coronavirus pneumonia, and the stocks at East Chinahave reached 323,500 mt on March 11. At present, the tank capacity becomestighter.
Some foreign styrene producers havestarted to cut operating rates since the fourth quarter of 2019 due to very lowprofits, and some ones undertook routine turnarounds. Additionally, given therefining and chemical complexes in the world, the feedstock supply gotguaranteed.
China’s dependence on imported styrenewas 28% in 2019, and the top five suppliers for China’s styrene were SaudiArabia, Japan, Taiwan, Kuwait and Singapore with a proportion of 32%, 15%, 12%,11% and 10%, respectively.
Polyesterindustry chain
China is the world's largest textileprocessing and exporting country. China’s textile exports were greatly shockedby gloomy global economy as a result of worldwide virus spread and crashedcrude futures prices. In the meantime, exports of upstream polyester productsuffered barrier.
In 2019, China’s polyester productexports totaled 7.1 million mt, accounting for 14% of China’s total output ofpolyester product.
PET: China’s PET demand from foreign market moved down amid global virus spread andslowdown of global economy growth. At the same time, PET prices continuallywent down affected by crashed crude futures prices.
China is the largest PET producer inthe world. Its annual PET exports take the lead and the export market share hasbeen expanding.
In 2019, the total exports of PETamounted to 3.438 million mt. India, the Philippines, Indonesia, Vietman andSouth Korea were the main importers for China’s PET bottle chip. In addition,China’s PET exports to Africa and Europe increased.
Textile and garment: China’s textile and garment exports dropped affected by the prolonged SpringFestival holiday resulting from the epidemic in China, and will keep fallingamid worldwide virus spread.
During January-February 2020, China’stextile and garment export value dropped 20% year on year to $29.83 billionwith textile export value falling by 19.9% to $13.77 billion and garment exportvalue down by 20% to $16.06 billion.
As the conventional importers forChina’s textile and garment, the European Union, the US and Japan are greatlyshocked by coronavirus pneumonia. In the European Union and Japan, the virusoutbreak are very likely to drag down the economy recovery, which will furtherweaken textile and garment market there.
China’s textile and garment exports tothe US may keep falling. Before China’s Lunar New Year, China and the US havesigned the first stage trade deal in which the US cut or cancel tariffimposition on some products from China. However, subsequent trade talks may beput on hold by the global outbreak of pneumonia. In addition, China’s clothingfactories delayed production amid the pneumonia and some ones have exportedmore goods to Southeast Asia such as Vietnam.
Methanol
Methanol prices at ports and inlandboth plummeted. Thanks to virus spread in the world and plunges in crudefutures prices, derivative product market dived and international stock marketwas shocked strongly.
China’s methanol imports will beimpacted little in the short run, but will go down in medium-to-long term.China’s methanol imports from Iran ranked first for a few years with a proportionof 25%-30%. However, the supply from Iran will shrink as the virus outbreakwill drag down operating rates of methanol plants there and delay the startupof new units. Furthermore, cargoes from the Middle East will not arrive asscheduled affected by international routes.
Plasticindustry chain
Polyethylene (PE): China’s PE imports may drop as virus spread resulted in transport constraint.In 2019, China imported around 16.67 million mt of PE, accounting for 48.37% ofChina’s PE consumption, and the imports were mainly from the US, Iran, SaudiArabia, Singapore, Thailand, South Korea and Japan. China’s PE exportsbasically suffered no impacts. In 2019, China only exported 282,400 mt of PEwhile China’s annual output of PE reached 17.79 million mt.
China’s plastic products exports willbe impacted greatly. In 2019, China’s plastic products exports hit 14.20million mt, accounting for 20% of the total exports.
The spread of virus will further dragdown economy in Japan, South Korea and Europe, which will result in fallingdemand for plastic products from China, but the demand for polypropylene andLDPE or LLDPE keeps rising due to upward consumption of masks.
The virus caused panic in globalfinancial market, and accordingly Chinese market players became cautious andheld bearish expectations for the future market due to concerns of retreat ofglobal economy.
Expandable polystyrene (EPS): China’s EPS imports and exports both suffered tiny impact from turbulent globalmarket, as the goods were mainly consumed by domestic users. In 2019, theimports and exports only hit 64,200 mt and 262,000 mt, respectively.
Chemicalfertilizer industry chain
China chemical fertilizer marketplunged due to expectations of falling exports and cost reduction.
The cost support became weaker as coaland natural gas prices both went down due to crash in crude futures prices.
As for exports, China’s chemical fertilizer was mainlyexported to India, Pakistan and Southeast Asian countries, but some countrieshave adopted port control measures affected by virus spread. In addition, thelocust disaster seriously affected the local agriculture.
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