Rising Oil Prices Boost Chemical Market Prices
——Domestic Chemical Market in First Half of November

The big rise in crude oil prices in early November buffered a weak chemical market in China. During the statistical period (October 31 to November 13), the chemical price index (CCPI) released by Chemsino closed at 5 129, up by 0.8%. Among the 160 products in the statistics, 90 products’ (56.4%) index increased, while 49 products (30.6%) fell and 21 products (13.1%) remained flat. Refer to Table 1 and Table 2 for details.

Products with rising ranking

Naphthalene, o-xylene and phthalic anhydride
Naphthalene, o-xylene and phthalic anhydride respectively rose by 14.3%, 11.5% and 14.5%. The prices of naphthalene increased greatly, reaching RMB4 000 (per ton, similarly hereinafter). Most coal tar deep-processing producers have shut down their units for maintenance as the winter is coming, and naphthalene utilization has decreased, and some manufacturers such as Ningxia Baofeng and Shandong Baoshun have shut down their units for maintenance. The market supply became short so prices rose. However, demand for naphthalene is weak at present. The prices are not likely to stay at the present high levels after the restarting of those units. After four months of decline, the phthalic anhydride market rebounded rapidly and powerfully on the back of high operating costs, low inventories and increasing demand from DOP makers, which further boosted the rise of naphthalene prices. Prices of o-xylene, another raw material of phthalic anhydride also climbed due to the increase in phthalic anhydride prices and rumors of a Sinopec production curtailment.
Bisphenol A
The Ministry of Commerce announced provisional anti-dumping measures on bisphenol A originating in Thailand, on November 9. In the following days, the domestic bisphenol A market climbed by RMB1 500, hitting a three-year high. The Bisphenol A market was already on an uptrend due to an increase in benzene prices prior to the announcement. However, Wanhua’s 70 kt/a plant is expected to be put into operation in the middle of this month, and this might restrict the upward trend.
ECH
The ECH market has soared 90.7% since July, and market prices have reached the highest level in six years. Low operating rate due to environmental protection policies and short supply of glycerin are two major contributors to the substantial rise. Meanwhile, propylene-based output was mainly for contract-supply, leaving very little for spot market, and the amount imported did not increase obviously. All these factors tightened the supply of ECH. In mid-November, Jiangsu Yangnong’s unit was shut down for maintenance, aggravating the bullish sentiment. Prices will likely remain high with a slim possibility of further increases.

Products with declining ranking

CPL
CPL and PA6 prices began to fall in early November, respectively down by 12.8% and 6.9%. The major reasons are overly high prices, huge profits and weak demand. New capacity of Shandong Luxi and Fujian Shenyuan was expected to come on stream this month and dampened market sentiment. However, cyclohexanone prices are rising, riding high production costs and a short supply, and might buffer the slide of CPL prices.
Acetic acid and acetic anhydride
Despite the frequent maintenance of acetic acid plants (Celanese, SOPO), few transactions have been made. But maintenance helped to offset the unfavorable effects arising from high inventory and new shipments. High market prices exerted pressure on end users, and demand was weak in the off-season, so acetic acid producers had to cut prices to stimulate sales. However, vinyl acetate and acetic esters downstream also started to decrease. So it is expected that acetic acid trade will remain soft, as will its downstream markets. Acetic anhydride prices plunged by 11.0%, due to an ample supply.
Acrylonitrile
A sharp decline in the acrylonitrile market has continued for some time. The bearish sentiment was obvious as Jilin PC planned to restart its 110 kt/a unit and Shandong Haili planned to launch its 130 kt/a new line. The price decrease was especially large in Shandong. As the peak season has ended and demand turned weak new transactions became rare. Now inventories are low and prices seem stable at a low level, leaving the market in the doldrums.

Other major products

Aromatics and derivatives
During the statistical period, WTI crude oil futures rose by 4.8% and Brent crude oil rose by 3.7%. In this context, aromatics and most aromatics derivatives all rose – benzene, phenol, styrene and PX went up by 5.1%, 7.4%, 7.7% and 5.6%, respectively. Maleic anhydride even climbed 10.4%, as the market inventory has been tight for a long time due to lower operating rates of benzene-based maleic anhydride producers. However, the chemical market is offseason, so demand is weak, and new deals are rare, and market prices are not likely to increase further. Supported by reduced arrivals of imports, recovering demand – especially demand for blending oil in northern areas – and the increase in BTX and MTBE, toluene prices went up by 4.7%, and solvent grade and isomeric grade xylene prices rose 7.2% and 7.5%, respectively. Meanwhile, affected by a decrease in polyurethane prices and the restart of Shanxi Tianji’s 130 kt/a aniline unit, aniline prices dropped 5.2%.
Polyester & its raw materials
Despite recent increases in crude oil and PX prices, domestic PTA futures and spots both lacked a basis for rising. Although quite a few PTA plants were shut down for maintenance and the overall supply was tight, the market sentiment was dampened by news that Xianglu PC restarted its 4.5 million t/a unit, Tongkun PC launched its new 2.2 million t/a line, and Huabin PC restarted its old 1.4 million t/a unit in late October and would launch another 650 kt/a unit in November. As for MEG, the favorable factors of rising crude oil prices and maintenance downtime of Saudi Arabian plants were offset by weak demand, resulting in slow sales. Polyester prices rose slightly as downstream factories with low polyester inventories pushed rush orders. The polyester plants will be shut down for maintenance in Q4, so the prices are likely to stay high.
Plastics and resins
PVC market prices kept declining in the first half of November, and ethylene-based and acetylene-based products were down by 2.3% and 2.2%, respectively. As operating rates have started to decrease, prices are likely to bottom out pretty soon. PP futures climbed, but the spot market, amply supplied, did not see a huge increase. PC prices rose 4.9% thanks to a tight PC supply and an increasing feedstock prices. Prices of unsaturated polyester resin and epoxy resin both soared, based on rising feedstock prices.
Market prices may rise slightly
Although the chemical market entered an offseason in November, many products enjoyed price increases supported by high crude oil prices. If such favorable factors do not persist, the prices of these products will decrease to their previous levels.
Environmental protection will be strengthened seasonally in northern areas as winter is coming. Policies restricting production will be enforced in Beijing, Tianjin, Hebei and surrounding areas. Due to this production slowdown, some products’ prices will remain strong. Meanwhile, plants will be shut down for maintenance in Q4. So, the market is likely to see modest price increases in the second half of November.         

Table 1   Hot products’ market prices      (RMB)

?    ?    Up (%)    MoM    YoY
CCPI    5 129    1.1    0.8    13.0
Phthalic anhydride    7 900    14.5    14.5    -4.8
Naphthalene    4 000    14.3    14.3    5.3
Bisphenol A    12 400    15.3    12.7    47.6
ECH    14 650    11.8    11.8    84.7
Acrylonitrile    14 600    11.0    -9.9    43.1
Acetic anhydride    6 500    12.3    -11.0    43.3
CPL    15 700    15.0    -12.8    33.1


Table 2   Major products’ market prices       (RMB)

?    ?    Up (%)    MoM    YoY
CCPI    5 129    1.1    0.8    13.0
Propylene    7 950    5.2    2.2    13.1
Butadiene    8 750    4.6    -3.8    -31.1
Methanol (port)    2 900    6.8    2.5    22.9
MEG    7 420    1.8    0.0    16.9
Propylene oxide    11 700    6.4    -4.1    21.9
Acrylonitrile    14 600    11.0    -9.9    43.1
Acrylic acid    7 800    3.2    -1.9    -2.5
Benzene    6 620    6.3    5.1    14.4
Toluene    5 550    4.9    3.7    2.8
PX    7 120    6.4    5.6    7.6
Styrene    10 450    8.9    7.7    3.5
CPL    15 700    15.0    -12.8    33.1
PTA    5 400    4.7    3.6    10.7
MDI    27 800    6.9    -5.1    54.4
PET chip (fiber grade)    7 780    1.0    1.0    18.8
HDPE (yarn)    10 400    2.0    1.5    -2.8
PP (yarn)    9 000    2.3    1.1    4.7
SBR 1502    14 200    5.2    4.4    1.4
BR    12 600    4.5    -1.9    18.7
Urea (46)    1 820    1.1    0.8    29.1