Naphtha cost surged 11% WoW to US$607/t on higher oil price, though supply remains abundant, particularly from Russia due to EU sanctions. Unchanged product prices WoW led to weakened petrochemical product spreads across the board, mainly for the olefins chain. The market is cautious regarding expected new stimulus in China given a persistent demand-supply imbalance, hence converters tend to adopt a wait-and-see approach with hand-to-mouth buying when prices drop to desired levels, leading to most transactions occurring in the lower price range. Product spreads are expected to remain weak in coming weeks until China stimulus becomes more apparent.
Average PE/PP spread down 15% WoW to 8-month low. With stable PE/PP price WoW, higher naphtha cost cut average PE/PP spread 15% WoW to US$329/t – the biggest WoW decline since Jan 2023. Demand-supply imbalance regionally makes it tough to adjust product price to reflect higher feedstock cost. Sluggish demand growth in China has worsened market sentiment amidst additional capacity from its self-sufficiency policy for petrochemical products. The market expects a stimulus package but there is little chance of a repeat of the 2009 stimulus because of high levels of debt. (ICIS) China’s total debt at 250% of GDP already surpasses the US’.
Pricing power of aromatics chain more apparent. PX price has risen since mid-May, up 5% WoW to a 3-month high of US$1,115/t, reflecting tighter PX supply in Asia on higher downstream PTA utilization rates to serve polyester production, including the startup of Hengli Petrochemical’s 2.5mtpa-PTA plant. The price rise was unable to offset higher naphtha price, easing PX spread 1% WoW to US$509/t, though still above 12MMA of US$447/t. Benzene spread (-1% WoW) was also hurt by higher naphtha cost while demand for benzene downstream products, mainly durable goods and construction materials, remains sluggish.
Higher feedstock cost hit integrated PET spread WoW. PET bottle chip price was steady WoW at US$920/t but integrated PET spread sank 26% WoW to an 8-month low of US$111/t vs. 12MMA of US$185/t as PET feedstock (PTA and MEG) prices rose 3-4% WoW in tandem with oil price (+5% WoW). PET bottle chip inventory has risen recently as overall demand remains weak. (CCF) Sentiment for PET bottle chips is conservative and cautious given the addition of nearly 5 mtpa in capacity this year, mainly in China, further weakening the supply-demand dynamics.
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