The Chemical Market Was Booming in July, 2017

1. Overall Chemical Market Analysis

The chemical industry increased greatly in July. According to data from Chemsino, the China Commodity Price Index (CPPI) increased continually, which was 4,644 and increased 4.5% at the end of July. Among chemical products, 60% of the products (96) saw increased price; 10% of products (16) saw stable price; and 30% of products (48) saw decreased price.

2. Hot Products Analysis

> TDI: The TDI market increased in July. Up to July 31, the TDI price was RMB 31,000/mt, which increased 35.4%. Units in Covestro Shanghai, Sinopec Fujian Company and Juli Chemistry were shut and underwent maintenance, which gave a chance for TDI factories to increase the TDI prices.

It is predicted that the TDI market will increase greatly. At present, on one hand, TDI factories will plan to control to sell goods and support the TDI market. On the other hand, the downstream users will show an interest in inquiry and purchasing influenced by the “buy-high” mentality. The TDI market will be active. However, compared to last year, the TDI market this year will show retaliatory price rebound, and it will be hard to reach RMB 50,000/mt.

> Butanol Octanol: The butanol octanol market increased obviously in July. The increase rates of n-Butyl Alcohol, isobutanol and capryl alcohol were 20.2%, 19.4% and 17.3% respectively. The butanol octanol operating rate decreased because environment protection supervision was strict. As devices in Luxi Group and Shandong Jianlan Chemical were still shut, the tight supply supported the butanol octanol market. From late June to July 31, the butanol octanol market increased significantly. Also, the DOP price increased 14.3%, with butanol octanol price increasing greatly. However, as the butanol octanol price rose rapidly in late July, the downstream users showed resistance to high price and weak interest in purchasing. As a result, the capryl alcohol market decreased and DOP market followed.

> Caprolactam and PA6: The polyamide (PA6) and caprolactam markets increased continually. The increase rates of PA6 and caprolactam were 15.9% and 15.5% respectively. Part of units in Chinese factories were shut and underwent maintenance influenced by environment protection policy. As a result, the decreasing supply of caprolactam supported the price, and the PA6 prices followed. In the future, a 100kt/a unit in Lanhua Group and a 200kt/a unit in Yangquan Coal Industry will increase capacity and start to sell goods to the market in August. At that time, the tense supply-demand pressure will release and control the caprolactam price to increase in the future.

> Aromatic Hydrocarbon: In July, the prices of benzene, solvent-grade xylene and heterogeneous-grade xylene decreased 1.0%, 1.0% and 0.6% respectively, while the methylbenzene prices increased 0.6%. As the global cruel oil market showed an uptrend, the West Texas Intermediate (WTI) and Brent cruel oil prices increased 9.0% and 9.9% respectively, which supported prices of hydrocarbon product. Although the production cost of benzene and xylene markets were better, the inventory in Chinese hydrocarbon product market was still in a high level. Also, the downstream demand was limited influenced by environment protection policy. As a result, supply-demand was the main reason to stop downstream market increasing.

> Plastic Resin: The overall plastic resin products increased in July. The prices of PVC produced via ethyne method, PP and LLDPE increased 11.6%, 8.6% and 2.1% respectively. China notified WTO formally that China would no longer accept foreign waste from the end of 2017, including waste plastics. It is predicted that the supply of waste plastics market will become thin, which supports the demand of news plastic good. In the future, the prices of LLDPE, PP and PVC futures will increase rapidly and promote the inventory price. The players will be bullish about the PVC futures market, as the raw material price increased. The supply of calcium carbide in Northwest China was limited influenced by the environment protection inspection. Furthermore, the coal prices were firm and increased 2.4%, which supported the calcium carbide prices and the production cost of PVC via ethyne method.

> Polyester: The polyester market was modest in July. The PTA prices increased first and then decreased. Up to July 31, the PTA price was RMB 5,180/mt, which increased 8.4%. As the units underwent maintenance, the supply of PTA decreased which promoted the PTA prices. Units in Jialong Group started taking overhaul in July. At the same time, Sinopec Yangzi Petrochemical, Hanbang Group and Pengwei Petrochemical planned to delay the time of restarting units. In the future, the supply of PTA will increase. A 600kt/a in Hangbang Group will restart, and Sinopec Yizheng Company will delay the maintenance of a 660kt/a unit. As a result, the PTA market price will decrease.

The ethylene glycol market increased 6.2%. In Q2, many ethylene glycol factories started units maintenance, such as Sinopec Fushun Company, Sinopec Shanghai Company and Sinopec Yangzi Company. The Chinese ethylene glycol operating rate decreased which supported the ethylene glycol to be a high level.

3. Forecast
The chemical market in July increased greatly. The trend of global cruel oil had less affect on the chemical market. The supply of some chemicals products was tense, which was the main reason for increasing price.

On July 24, Saudi stated that the export volume of cruel oil in Saudi is about 66 million barrels/day in August. The export volume of cruel oil in Nigeria is 18 million barrels/day, which decreases obviously and supported the supply of cruel oil. Recently, the cruel oil inventory in USA decreases continually, and the players feel confident about the cruel oil market. As a result, the cruel oil market price increased continually in July. However, as the WTI and Brent cruel oil is $50/barrels, which is in a high level, the cruel oil price increases slightly in August.

The demand for chemical products did not decrease greatly in summer this year. According to data published by National Bureau of Statistics of the People’s Republic of China on July 17, China's GDP reached 38.149 trillion yuan by H1, 2017, which increased 6.9% Y-O-Y. The PMI was 51.4% in July, which decreased 0.3% Y-O-Y. It is indicated that the domestic economy will increased clearly, and support the demand for chemical. To sum up, the chemicals market will be firm in August.