Asian chemical product prices continued to fall in August

A recent report released by ICIS shows that in August, the prices of most Asian petrochemical products are expected to continue to fall. The reason is that August is in the off-season for market demand in Asia, and the international oil price has fallen due to international economic pressure, which has depressed the overall petrochemical market.

Among the 31 major petrochemical products covered by ICIS's Asian price forecast, the average price of 26 products in August is expected to fall. Among them, dioctyl phthalate (DOP), octanol and caprolactam will lead the decline. At the same time, 5 petrochemical products are expected to rise, among which ethylene, acrylonitrile-butadiene-styrene copolymer (ABS) and styrene will have the largest increase.

In terms of falling products, DOP and octanol, as well as many bulk chemicals, are subject to relatively weak economic conditions. The poor economic data of major economies has caused market concerns to spread, and many market participants believe that the global economic outlook, which is already weak in growth, is becoming increasingly pessimistic. The most important data that triggered market concerns is the non-farm employment data released by the US Department of Labor a few days ago. Data show that the U.S. unemployment rate rose to 4.3% in July, reaching the highest level since October 2021. As a result, crude oil prices have fallen recently. At present, Russia, Kazakhstan and Iraq have proposed remedial measures for the decline in crude oil prices, and the intensified tensions in the Middle East have also eased the decline in oil prices to a certain extent. But for the chemical market, the current downward trend of crude oil still suppresses chemical prices.

In addition, summer is the traditional off-season for demand in the petrochemical industry. In Asia, the increase in extreme weather such as high temperatures and typhoons has led to increased uncertainty in chemical production, especially for terminal industries where small and medium-sized enterprises account for a large proportion, and terminal demand continues to be weak.

As one of the most important downstream markets for octanol and DOP, the Asian construction and automotive markets have been in a trough period recently, causing octanol and DOP prices to continue to fall. In addition, the expectation of a rapid increase in supply will also cast a shadow on the Asian butyl octanol market, and the price of Asian octanol market is expected to fall under pressure, and market sentiment will remain cautious. Affected by the weakening of raw materials, the price of DOP market also fell simultaneously. In addition, due to the suppression of the construction and automobile markets, the demand for the plasticizer industry chain is expected to remain weak and stable.

Summer is also the peak season for tourism. Regional tourism demand in China and Southeast Asia is strong, while tourism demand in Japan has soared due to the low exchange rate of the US dollar against the yen. As a result, in Asia, terminal industries such as food, beverages, and clothing related to tourism have achieved steady growth, further boosting demand for raw materials polyethylene (PE) and polyethylene terephthalate (PET). However, ICIS said that PE and PET prices are expected to decline in August, mainly due to ample supply and weaker costs.

Despite the decline in PE prices, the operating rate of crackers in Asia is expected to remain high due to profit recovery brought about by increased demand and the resumption of some unplanned shutdown units. In July, the average operating rate of crackers in South Korea was around 82%, and it is expected that the average operating rate of crackers in South Korea will continue to remain at a relatively high level in August. In addition, with Vietnam's Longshan Petrochemical scheduled to restart at the end of the third quarter, the cracking load in Southeast Asia is also expected to increase in the third quarter. Therefore, while ethylene prices rise, Asian olefin production is expected to increase, leading to softer Asian propylene and butadiene prices.

As for butadiene, ICIS said that the decline in Asian butadiene prices is expected to be limited before December as the market is still roughly balanced. Only unplanned supply disruptions due to force majeure factors such as weather may affect the market outlook.

In terms of aromatics, ICIS expects the prices of aromatics and their derivatives to be supported. In August, there were fewer maintenance plans for the Asian benzene industry chain, and the average operating rate of the benzene derivative market increased due to profit recovery, such as styrene, phenol and other industries. According to ICIS data, thanks to the restart of maintenance equipment and improved profits, the operating rates of styrene and phenol in Asia are expected to increase by 3 to 4 percentage points in August, reaching 72% and 74%, respectively, thereby boosting Asian benzene demand and prices. Low inventory is another important factor supporting the upward trend of benzene and styrene prices.

At the same time, the decline in operating rates and improved demand will push up Asian ABS prices. In July, the average operating rate of the Asian ABS industry fell by about 7 percentage points, and it is expected to continue to fall by about 2 percentage points in August.