Asian petrochemical markets await post-holiday activity; eyes on US-China trade war

SINGAPORE (ICIS)–Asia’s petrochemical markets are poised for a resurgence in activity following the May Day holidays, with discussions subdued as buyers await signs of recovery and producers restart plants over the coming months.

• Producers to restart plants, refill inventories after holidays
• Delayed purchases until after holidays
• US has contacted China for trade talks – Chinese state media

The May Day or Labor Day holiday is celebrated in China from 1-5 May, and in most other Asian countries on 1 May. Japan and South Korea also observe several days of holiday in May.

Feedstock propane supply-demand fundamentals are being weighed on by the ongoing US-China trade war, which is affecting the cost of propane imports and could lead to reduced operating rates for propane dehydrogenation (PDH) units. This may tighten propylene supply in the longer term, potentially supporting prices if demand picks up.

Demand has been sluggish in the propylene market, weighing prices down as producers maintain low inventories ahead of 1 May.

However, after the Labor Day holiday, there is an expectation of increased supply, which may lead to a more balanced supply-demand scenario as they resume normal operations.

Separately, the glycerine market in Asia is expected to see a notable pick-up in restocking activities after the holidays.

Chinese buyers, who have been holding back purchases due to a sluggish downstream epichlorohydrin (ECH) market and uncertainties surrounding the US-China trade war, are likely to return to the market.

“We will wait until after the Labor Day holidays before we commit to any purchases as we expect the downstream ECH market to slow down after the holidays,” a Chinese buyer said.

The ECH market, a key downstream sector for glycerine, is anticipated to experience a price drop after the holidays due to demand remaining weak amid the US-China trade war.

Asia’s butyl glycol (BG) import prices were assessed as lower this week amid a bearish market sentiment amid unimproved demand conditions.

In southeast Asia, the glycol ethers market is undergoing price adjustments as producers lower offers in anticipation of the Labor Day holidays.

China’s export prices for propylene glycol ether (PGE) also softened as sellers looked to increase sales before the holiday.

Meanwhile, propylene glycol prices are expected to remain stable as market participants await the outcomes of the holiday period.

In China, domestic prices have held steady, but the overall sentiment remains cautious due to the impact of the holiday on production and logistics.

The stability in pricing reflects balanced supply-demand fundamentals, though any unexpected disruptions post-holiday could lead to short-term volatility.

PRODUCERS ADJUSTING OUTPUT
The acetic acid market is experiencing softening spot prices due to lengthening supply as plants restart operations following maintenance turnarounds.

However, the holiday period is likely to further influence supply dynamics, with some producers adjusting output to manage inventory levels.

In China, a new plant tied to a downstream ethylene vinyl acetate (EVA) unit has come online. It is among other plants in Asia with a combined capacity of nearly 1.8 million tonnes/year which have either already restarted or are restarting in May,

EVA-linked vinyl acetate monomer (VAM) demand is generally expected to slow as June approaches, when a pricing policy in China – which has spurred a rush in solar panel installations across the country – comes into effect.

Concerns of slowing demand were kept on the boil in Asia ethyl acetate (etac) markets amid fluid developments surrounding trade tensions between the US and China, and its potential ripple effect on sentiment in the days ahead.

Notably, market players were conscious of weakening product spreads or etac production margins.

Eroding margins have thus left regional suppliers with little room to scale back asking levels, despite the current market climate that was viewed as largely skewed towards buyers.

EYES ON POSSIBLE TRADE TALKS
As the US-China trade war persists, both sides have indicated a willingness to engage with each other on trade talks.

On Friday, a spokesperson of China’s Ministry of Commerce said that senior US officials have “repeatedly expressed their willingness” to negotiate with China on tariffs, according to state media outlet CCTV.

The spokesperson said that the US has sent requests hoping to talk to China, and the Asian country is currently evaluating them.

“China’s position is consistent. If we fight, we will fight to the end; if we talk, the door is open,” the spokesperson said.

Meanwhile, US President Donald Trump has maintained that trade talks are ongoing between the two largest economies in the world, which Chinese state media denied.

Amid US tariffs, manufacturing activity continued to remain sluggish across Asia, including China and Japan.

In April, China’s manufacturing activity shrank as export orders weakened due to the escalating trade war with the US. The official purchasing managers’ index (PMI) dropped to 49.0, indicating contraction, down from 50.5 in March.

Japan’s manufacturing PMI rose to 48.7 in April from 48.4 in March, marking the tenth consecutive month of contraction.

Focus article by Jonathan Yee

Additional reporting by Seymour Chenxia, Helen Yan, Julia Tan, Joy Foo and Matthew Chong and Melanie Wee.