【Haichuan Chemical Salary News】Exports Focused on the Chinese Market: Are Ethylene Glycol and PTA in Short Supply?
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Currently, China’s petrochemical industry is facing another challenge – rising inventory levels and port congestion. Affected by the global pandemic of COVID-19, the global supply of petrochemical products exceeds demand. Foreign producers prefer the Chinese market, which is recovering economically faster, as a destination for their exports. Yet China’s own exports are also impacted by the pandemic abroad, resulting in an increasing inventory of petrochemical products in the country. Specifically, demand from the two traditional export markets of the United States and Europe has declined: due to the slow economic recovery in these countries and regions, demand for manufactured goods there has dropped, and the same situation applies to other regions including Asia. With shrinking demand in overseas markets, demand for petrochemical raw materials in China’s domestic market has also remained weak. China has become a preferred export destination for overseas petrochemical producers: With weak demand in other parts of the world, China, which recovered first from the pandemic lockdowns, has become the favorite export destination for global petrochemical exporters. The negotiations on freight rates for petrochemical shipments held in Asia this week focused primarily on demand from China, with particularly strong demand for petrochemical products coming from Southeast Asia and the Middle East. A ship broker said, “Almost all the shipping capacity scheduled to go to the Chinese market in May has been booked, and there is still a lot of cargo waiting to be shipped this month.” ”
Stocks of petrochemical products continue to rise: Market analysts say that last month, refiners in Asia and the Middle East actively sold various petrochemical products, including benzene and polyxylene (PX), to Chinese customers. However, the massive influx of imported goods could overwhelm China’s storage capacity for petrochemical products. An analyst at S&P Global Plastics Analytics Asia said, “We have seen, and will continue to see, an increasing inventory level of many major petrochemical products in China.” This is even more evident for solid chemicals, polymers, and synthetic rubbers, as their storage conditions are easier compared to liquids. ”
Chinese benzene inventories will reach a peak in June: Rising imports of benzene into China are contributing to an increase in inventories, and with a large volume of imported benzene arriving in the Chinese market starting in May, it is expected that Chinese benzene inventories will reach their peak in June. Despite a slight improvement in demand, market participants remain worried. The benzene inventory in storage tanks along China’s eastern coast has increased significantly by 7.3% compared to last week, reaching 199,000 tons. Analysts at Anxunsi said that with the arbitrage window closed, it has become difficult for Asian producers to export benzene products to the U.S. market. Therefore, the Chinese market has become the preferred choice for most Asian sellers. Sellers in Europe and the Middle East are also considering shipping more benzene to China.
A large amount of imported methanol is waiting to be unloaded: At Taicang Port in Jiangsu Province in eastern China, ships carrying methanol have to wait around 10 days before they can unload their cargo, which results in an increasing number of ships waiting for berths. Traders said that as of the week ending May 8, there was an estimated 700,000 tons of methanol in storage at ports in Jiangsu, with more imported methanol continuing to flow in. A senior analyst at Anxunsi said that due to limited storage space and rising inventory levels, there is a price difference of 70 yuan per ton between methanol goods available for immediate delivery and those scheduled for delivery in 10 days. Normally, there is no price difference between the two.
The ethylene glycol inventory is almost depleted: inventory levels of ethylene glycol in the Chinese market are also exceptionally high, and due to large import volumes, many storage tanks are nearly full. Due to the shutdown of local factories, domestic ethylene glycol supply has declined. Meanwhile, downstream textile export orders have declined, and demand for ethylene glycol from end-users is weak. According to AISI data, as of the week ending May 8, China’s ethylene glycol inventory increased by 4.9% from the previous week to 1.23 million tons. The daily unloading volume of ethylene glycol at a major port in eastern China is 5,700 tons, while at another major port it is 3,500 tons per day.
Inventory of purified terephthalic acid (PTA) exceeds monthly demand: For PTA, inventory levels in China are on the rise due to weak demand from downstream polyester industries. It is estimated that PTA inventory in China has exceeded 4 million tons, surpassing monthly demand, which is a concern for market participants, despite relatively stable domestic PTA prices. Inventory in PTA futures warehouses has been on the rise; due to weak demand in the physical market, more and more PTA goods are being stored in these futures warehouses.
A couple of days ago, BP and a company in Shandong authorized a PTA project with a capacity of 2.4 million tons