Gustav Holmvik, S&P Global Platts team leader for the Asian petrochemicals market, looks at the factors that will shape the region's aromatics sector in the second half of 2018.
Related special report: Asia Petrochemical Outlook H2 2018
Welcome to The Snapshot, our series which examines the forces shaping and driving global commodities markets today.
In this episode, let's take a quick look at what lies ahead for the Asian aromatics markets such as paraxylene, benzene, styrene, toluene and mixed xylenes.
In benzene, supply will likely remain ample in Asia in the second half of the year, but strong demand amid positive downstream margins is likely to provide some support.
With Asia structurally long in benzene, Northeast Asian sellers will continue to seek arbitrage opportunities to the US Gulf Coast, despite that window having remained closed on paper for most of first half of the year.
Benzene prices did not track the firm gains seen in crude oil in the first half of 2018 as the benzene-naphtha spread narrowed. It was calculated at $202/mt in the second quarter, down from $309/mt in Q1, based on S&P Global Platts data.
Could the spread potentially see some widening in the second half of the year?
In a related market, styrene monomer, the situation has been very different as producers have been enjoying very healthy margins of late.
After a turbulent start to the year, the SM market might see more stability in the second half after China announced its final antidumping duties on styrene monomer imports from South Korea, Taiwan, and the US in June. That may prove to be a watershed moment for the industry.
China's total SM imports shrunk 29% year on year in the first quarter.
Imports are poised to fall further in Q3 with more new SM plants starting up in China. In the next few years several large new SM plants are expected to start up, likely to further decrease demand for imports.
Another major petrochemical market, paraxylene, is on the threshold of some major changes with new production capacities starting up in the Middle East, Southeast Asia, and most importantly in China, the key importing country in the world.
However, the start-up of the new Chinese mega-plants looks to be pushed back into 2019, likely to provide some temporary stability to the market in the second half of this year.
Margins for PX production have also surged recently as also the new plants in the Middle East and Southeast Asia have faced delays. Will this trend continue, or will PX margins narrow again sooner rather than later?
For further insights into these matters, and much more, download the Asia petrochemicals H2 outlook report.
Until next time on the Snapshot - we'll be keeping an eye on the markets.