Global chemical trade flow under the epidemic is tilting towards Asia

Since the outbreak of the Novel Coronavirus epidemic, global oil and chemical trade flows have rapidly changed with the epidemic situation. According to An Xunsi news, due to the new crown pneumonia epidemic, the economic trends in the United States and Europe are not optimistic, demand has fallen sharply, and the prices of chemical products have plummeted. The market cannot see when the epidemic will end. Asia, where the epidemic is relatively mild, has become a dumping ground for chemicals around the world.

However, this does not mean that chemical manufacturers can make more profits. With Asia becoming the dumping ground for products, the prices of many petrochemical products in Asia have fallen to historical lows, and the arbitrage window for exports from the EU and the Americas to Asia is rapidly closing. At present, the arbitrage margin of ocean-going cargo transportation to the Asian market is already very low, or not attractive to traders. Asian markets with oversupply are also unlikely to absorb ocean-going or arbitrage goods from the European Union and the United States. It's just that the situation in Asia is slightly better compared to the European and American markets that are on the verge of collapse.

Methanol: export target China

An Xunsi analyst Rachel Qian said that due to the sluggish demand in Europe and America, methanol suppliers and traders are planning to export methanol goods to China. Since the key methanol market in India has been closed, methanol goods from the Middle East, especially Iran, have also been transferred to China. This will Lead to increased competition between imported goods and local Chinese goods, and may cause some Chinese manufacturers to reduce the operating rate of the device or shut down.

Butadiene: Arbitrage window closed

With the collapse of demand in the United States and Europe, the Asian butadiene market fell sharply in early April, due to the influx of large quantities of ocean-going butadiene goods from the West into the Asian market, forcing Asian traders to lower prices than expected Take off the goods. But as prices of many Asian petrochemical products continue to fall to record lows, arbitrage windows from the EU and the Americas to Asia are rapidly closing. The current arbitrage margin is neither feasible nor attractive enough to attract Asian traders to import goods from Europe and the Americas.

Due to China's sufficient domestic supply, China's demand for imported butadiene has dropped significantly. With the downturn in the downstream synthetic rubber market and the decline in demand for acrylonitrile butadiene styrene copolymers (ABS), the spot demand for butadiene has weakened.

In the United States, butadiene sales are small because end-use companies are still closed. The new coronavirus epidemic is expected to plague the US butadiene value chain for at least the first half of the year. Today, domestic butadiene goods are flowing to Asia, and Asia has become one of the few export markets for US and European producers. Market participants believe that this is unlikely to be a long-term solution.

PROPYLENE: the price of imported goods is lower

Propylene supply in Asia may also be surplus in the short term, because downstream producers are considering further reducing the plant's operating rate. Propylene products from South America and India have insufficient downstream demand and may be shipped to the Asian market.

According to data from An Xunsi, due to the sluggish market sentiment, as of April 3, the spot price of propylene in the Asian market had fallen to a low of nearly 55 years at US $ 557.5 / ton (CFR, Northeast Asia). Propylene producers in China are trying to increase the operating rate of their equipment when the cost of raw materials has fallen sharply. The demand for imported propylene in the Chinese market will depend on the price of domestic goods. Based on current prices, imported goods are cheaper.

Mixed xylene: great difference in price difference

The pandemic of the new coronavirus caused the price of Aromatic hydrocarbons in the United States to plummet, while demand in Asia was relatively strong. The arbitrage window for the export of mixed xylene from the United States to the Northeast Asian market reopened a few years later.

On April 6, the price of mixed xylene in the United States was about $ 270 / ton (FOB, Gulf of Mexico), while the price in the Asian market was $ 355 / ton (FOB, South Korea), and the price difference between the two was $ 85 /Ton. The freight rate between the US and Asia is US $ 70 to US $ 80 per ton, which means that arbitrage is feasible. According to market sources, due to the poor market prospects in the US, sellers of mixed xylene in the US even offered discounts on the basis of quotations.

In April of this year, South Korea Lotte Chemical purchased a batch of 30,000 to 40,000 tons of mixed xylene cargo from the United States, which is expected to reach the Korean market by the end of May. Other end users in Asia are also considering buying spot from the US.

Ethylene: Reduced arbitrage opportunities

Ethylene suppliers outside Asia continue to look for buyers of goods arriving in Hong Kong in May and June in the Asian market, as their domestic and neighboring market demand is declining.

So far, more than 90,000 tons of ethylene ocean-going goods delivered from April to the first half of June have been sold to the Asian market. However, as the spot prices of ethylene in Asia have further weakened, the arbitrage opportunities for exporting ethylene goods from the Americas and Europe to sellers in the Asian market have become less and less.