Naphtha cost climbed back up 4% WoW to US$549/t driven by higher oil price, though still 21% below three months ago. This weakened petrochemical product spreads almost across the board. Amidst continuing regional demand-supply imbalance, near-term sentiment will be boosted somewhat by China’s stimulus but we expect the market to remain cautious on the sector given the positive impact may not be as huge as experienced in 2009. Nonetheless, undemanding valuation may open opportunities for short-term trading, in our view.
Average PE/PP spread fell 5% WoW to a 3-month low. Higher naphtha cost (+4% WoW) shoved average PE/PP spread down 5% WoW to US$386/t – the first decline to <US$400/t since April. This reaffirms the adverse impact of the region’s demand-supply imbalance on China’s self-sufficiency policy for petrochemical products, while domestic demand remains sluggish due to weak consumer confidence. The market expects product spread to recover in the latter half of the year as China may deliver economic stimulus to prop up growth, especially for its battered real estate sector. Nonetheless, the impact may not as huge as the economic stimulus in 2009 given high public debt and the loss of consumer confidence. (ICIS)
PX spread slips WoW despite higher PX price. Tighter PX supply in Asia drove PX price up 1% WoW, but this could not offset more costly feedstock cost. PX-naphtha spread thus slid 2% WoW to US$511/t, though still better than 12MMA of US$451/t. PX spread is expected to outperform other products, at least in early 3Q23 on strong demand for gasoline in US driving season. Benzene-naphtha spread remained unexciting, weakening 3% WoW to US$216/t as benzene price fell to <US$800/t vs. >US$900/t in 1H23 on slow recovery of demand for durable goods.
Integrated PET spread weakens WoW. Integrated PET spread fell 6% WoW to US$149/t after a pause last week, vs. 12MMA of US$186/t. This was due to higher feedstock cost, PTA and MEG, which rose in tandem with oil price (+2% WoW) while price of PET bottle chips remained steady WoW at US$920/t. While overall demand remains weak, some restocking activity is evident. (czapp.com) New capacity additions, mainly in China, continue to keep buyers reluctant to accept higher offers. Chinese PET resin capacity has expanded by 1.85mtpa since April and a further 2.15mtpa is scheduled to come on stream in 2H23 despite the weak market.
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