Mixed change in spread amidst slow trading
Petrochemical product spreads were mixed last week with naphtha price down 1% WoW on muted market activity ahead of the year’s end, since demand for end products is likely to stay weak until after Chinese New Year in late Jan-early Feb 2025. Escalating supply pressure stemming from additional production capacities coming online in China adds further to the bearish pricing outlook. (Polymerupdate) We expect the petrochemical market to stay bearish over the next few weeks unless more positive factors, including additional economic stimulus in China, is announced. Maintain caution on the sector.
Average PE/PP spread aided by cheaper naphtha. Polyolefin product spread excluding LDPE rose 2% WoW to US$342/t, still below cash cost of US$350/t, thanks to a 1% WoW fall in naphtha cost against stable product prices WoW. Market sentiment was hurt by slow demand for year-end destocking and concern the US-China trade tension would disrupt trade flow, with the petrochemical industry already in the doldrums because of the demand-supply imbalance.
Higher demand for PX boosted spread WoW. PX spread improved 5% WoW to US$260/t, driven by higher demand from PTA plants, which increased operating rate while PX producers reduced utilization rate due to unattractive product spread when compared with 12MMA of US$363/t. Benzene spread fell 1% WoW to US$265/t on a similar 1% WoW fall in benzene price due to slower demand ahead of year’s end. Benzene spread has been trending up since Oct 2024, reflecting stronger demand from downstream producers of styrene and phenol once maintenance ended and production resumed in Nov 2024.
Integrated PET spread up WoW on lower MEG cost. PET price was unchanged WoW at US$820/t, the lowest since Jan 2021. Amidst subdued demand and with no signs of a significant pickup in the near term, buyers are postponing purchase commitments ahead of a long holiday. Demand is likely to turn sluggish ahead of the Lunar New Year holiday in late Jan 2025, which will slow trading momentum. Integrated PET spread edged up 2% WoW to US$117/t against 12MMA of US$113/t on lower feedstock price, mainly MEG. We expect tighter PX supply to dampen integrated PET spread over the next few weeks.
