Asia’s chemical markets are battening down the hatches as sentiment is being eroded from the dreadful Delta variant across the region, with logistical and port restrictions affecting supply chains.
Countries across Asia were hoping for things to improve post vaccination drives, but Delta variant jolted all hopes with the virus now surging in many countries in the region.
The pandemic is a nightmare in Thailand, Malaysia and Indonesia where a spike in cases is taking place. Early this week, new COVID-19 cases topped 20,000 in Indonesia; nearly 20,000 for Thailand and over 17,000 for Malaysia.
PETROCHEMICAL MARKETS IMPACTED
Ethylene shipments spot discussions for September-delivery were hampered by vessel delays following harsher restrictions on foreign vessels at certain ports in Jiangsu.
For numerous days last week, vessels were not permitted to berth at Yizheng – a major port for ethylene imports – while some ports like Taixing are currently not accepting vessels that sailed from Yangzhou.
From 5 August, vessels are not allowed to drop anchor overnight at Nantong without applying for permission, which is slowing down the delivery of cargoes to Yangtze river ports.
Some of the affected suppliers have been busy rescheduling their vessels for August shipments and are currently not ready to offer spot cargoes for September.
In the wider market, players are worried about potential supply chain disruptions in China if the country’s worst coronavirus outbreak in more than a year worsens and larger-scale lockdown measures are taken.
Acetic acid export discussions thinned in China, as traders await further clarity on the impact on vessel berthing/operations from new protocols imposed following a resurgence of COVID-19 cases.
Sentiment of traders weakened amid logistics and transportation restrictions in some regions.
“[There are uncertainties] on the impact of COVID and on the logistics front in Nanjing so it is understandable that buyers are hesitant on concerns of the impact on demand,” said a major acetic acid producer.
Equally, the sentiment of key buyers in India turned cautious on expectations of easing supply constraints after the restart of acetic acid plants in China and Singapore.
Oleochemical demand in Asia has slowed down because sentiment is taking a battering from the Delta variant infections, market sources said.
“Lower availability and relative strength of the US and Europe markets are keeping prices steady,” a regional supplier said.
Buyers are cautious and purchasing on a need-to-basis for smaller parcels, given the uncertain market outlook.
With regards to propylene, the delta variant has contributed to weaker demand in Asia, compounding previously bearish market sentiment arising from weaker polypropylene (PP) futures in China.
The variant has also led to logistical issues concerning the arrival of cargoes amid coronavirus-related port congestion, which could potentially result in supply-chain disruptions for about 4-5 days.
Additionally, such delays in shipping could result in a build-up of inventory pressure for C3 producers due to the increased time it takes for the vessels to return for loading.
However, such effects appear to be offset by the demand for Asia-origin deep-sea cargoes from Latin America and Europe, causing Asian suppliers to continue to keep offers relatively firm despite mild Asian demand.
Asian butadiene (BD) prices are at year-high levels currently, and more than double from the lowest point this year in January. But the main driver for this has been a strong arbitrage demand pull from the US, where prices are at a rare and substantial premium over Asia.
For intra-Asian trades, BD end-users are struggling to keep up with the BD uptrend, as Q2 2021 consumption in downstream markets – particularly that of synthetic rubbers, which accounts typically for about 75% of total BD usage in the region – have been ravaged by the pandemic, first in India and then in southeast Asia.
“Even if I can technically afford the higher butadiene asking prices now, I will still go slow on BD procurement since I may have to cut my own operating rate if my customers further downstream (in Malaysia) cannot run,” a regional maker of acrylonitrile butadiene latex (NBL) said.
NBL is a key ingredient for producing protective medical equipment and a number of production facilities for the latter are in Malaysia.
Meanwhile, on polycarbonate (PC), demand has been affected by the coronavirus pandemic for some time now, with the latest variant continuing to weaken demand for the embattled market.
Depending on the specific grade of PC, demand has fallen in varying degrees as downstream production rates dip.
Some downstream factories located in southeast Asia have lowered operating rates amid a new wave of coronavirus resurgences, and are unlikely to increase them soon.
Market sources underline that some buyers have also opted to procure smaller quantities of PC cargo per order, compared to pre-pandemic levels, in order to minimize any risk arising from market volatility.
According to the ICIS Supply & Demand Database, Chinese PC imports in 2021 for the period of January to June totalled 700,344 tonnes, registering a year-on-year decline of roughly 6.6% from the previous year.
However, some pockets of demand continue to support the market, with the PC/ABS compound continuing to see relatively good demand amid increased demand for home electronics during the pandemic.
Additionally, the upstream bisphenol A (BPA) feedstock market could be a source of support for the PC market, as the PC market is sensitive to price fluctuations in the BPA market, given that it comprises the majority of PC feedstock composition.
On acetone, China imposed movement control in some cities, including Yangzhou, where the surge had been notably the most serious, resulting in reduced transport facilities.
Several acetone shipments were heard to be unable to load at the ports, whilst some volumes were stuck at the ports without drivers to their destinations.
As such, for those in urgent need of volumes must pay higher prices to buy from those with existing supply.
Bucking the trend, Asia’s liquid caustic soda spot market has seen improved consumption despite the rapid rise of coronavirus infections.
Demand for Asian material has seen an uptick from major downstream alumina refiners in Australia.
Consumption has also increased with the startups of new downstream alumina refiners in Indonesia earlier this year, which been allowed to operate with minimal manpower restrictions despite a lockdown in the country.
Supply is expected to remain snug in the near term due to a Japanese producer’s lower operating rates since June, as well as several ongoing and upcoming regional turnarounds.
Source: ICIS by Felicia Loo https://www.icis.com/explore/resources/news/2021/08/11/10672666/asia-chemical-market-sentiment-takes-a-battering-from-delta-varient