Warning For The Petrochemical Industry in the Midst of a Cold Winter! In August, 26 Out of 31 Petrochemical Products in Asia Experienced a Significant Price Drop!

According to the latest report released by ICIS, a chemical information center, most petrochemical products in Asia are expected to continue their downward trend in prices in August. The reason for this phenomenon is that August is the off-season for market demand in Asia, coupled with the decline in international oil prices due to global economic pressure, which exerts downward pressure on the overall petrochemical market.

Of the 31 major petrochemical products covered by ICIS's Asian price forecasts, 26 are expected to see a decline in their August average prices. Among them, DOP, n-octanol, and caprolactam are among the top decliners. Meanwhile, five petrochemical products are expected to show an upward trend, with particularly significant increases for ethylene, ABS, and styrene.

In products with declining prices, bulk chemicals such as DOP and n-butanol are affected by the relatively weak economic situation in major economies. Poor economic data from major economies has spread concerns in the market, and many market participants believe that the prospect of weak economic growth globally is becoming more pessimistic. In particular, the non-farm employment data released by the US Labor Department showed that the unemployment rate in the US rose to 4.3% in July, the highest level since October 2021, which further exacerbated market concerns and led to a recent decline in oil prices. Although Russia, Kazakhstan, and Iraq have proposed countermeasures to counter the decline in oil prices, tensions in the Middle East have eased, the downward trend of oil prices still exerts pressure on the chemicals market.

Additionally, the summer season is traditionally a slow period for the petrochemical industry in Asia, and the increasing frequency of extreme weather events such as high temperatures and typhoons has increased the uncertainty of chemical production, especially for the end-user industries where small and medium-sized enterprises (SMEs) account for a larger proportion, leading to persistent weakness in end-demand.

The Asian building and automotive markets have been in a slump recently, which has also led to further declines in the prices of xylene and DOP. Meanwhile, the rapid increase in the expected supply of butyl xylene and DOP in the Asian market has put pressure on the market, and prices are expected to fall. Market sentiment remains cautious. The softening of raw material prices has also dragged down the DOP market price in tandem. Furthermore, the slump in the building and automotive markets is expected to keep the demand for the plasticizer value chain weak and stable.

The summer season is also a peak travel period. Tourism demand is strong in China and Southeast Asia, while demand for Japanese tourism has surged due to the weakening of the US dollar against the Japanese yen. This has led to steady growth in the end-use sectors of food, beverages, clothing, etc. related to tourism in Asia, further boosting demand for raw materials such as polyethylene (PE) and polyethylene terephthalate (PET). However, ICIS notes that PE and PET prices are expected to experience a downward trend in August due to an oversupply and softening costs.

Despite the downward trend in PE prices, Asian cracking unit utilization rates are expected to remain high, mainly due to profit restoration from increased demand and the resumption of some planned outages. In July, the average utilization rate of cracking units in South Korea was around 82%, and it is expected to remain at a high level in August. Additionally, with the planned restart of Long Son Petrochemical in Vietnam in the third quarter, it is expected that the cracking load in Southeast Asia will also increase in the third quarter. Therefore, despite the increase in ethylene prices, Asian olefin production is expected to increase, leading to softening of Asian propylene and butadiene prices.

In the case of butadiene, ICIS expects that the price decline in Asia will be limited in the next few months due to the market remaining in balance. Unless there is an unplanned supply disruption caused by weather or other unforeseen factors, the market outlook is not expected to be significantly affected.

In the aromatic sector, ICIS expects prices for aromatics and their derivatives to be supported. In August, there are fewer maintenance plans in the Asian benzene value chain, and the average operating rate of benzene derivatives such as styrene and phenol has improved due to profit restoration. According to ICIS data, the operating rates of Asian styrene and phenol are expected to increase by 3 to 4 percentage points in August to 72% and 74%, respectively, thanks to the restart of maintenance facilities and improved profitability, thereby boosting Asian benzene demand and prices. Low inventories are also an important factor supporting the upward movement of benzene and styrene prices.

Meanwhile, the decline in utilization rates and the improvement in demand will push up ABS prices in Asia. In July, the average utilization rate in the Asian ABS industry dropped by about 7 percentage points, and it is expected to drop by about 2 percentage points in August.