Metallurgy / Chemicals / Rubber & Plastics

As the new crown pneumonia epidemic restriction measures continue to pressure the demand of the Asian market, some major petrochemical markets in Asia have seen new opportunities to export to the active European and American markets.

In the fatty acid market, the EU’s demand for C18 oleic acid remains strong, while demand in Asia has declined due to the return of the epidemic and the re-imposition of blockade restrictions. A fatty acid producer in Southeast Asia said that in view of the sharp increase in container freight, the company may consider exporting fatty acids to the EU in bulk. Bulk freight to the EU is about US$150 per ton, while container freight is US$400 per ton.

At the same time, as the price of Type I base oil in Europe soared from February to May this year, the arbitrage window for Type I base oil from Asia to Europe has been opened. In May of this year, European buyers bid for Class I SN500 base oils and bright oils in the Southeast Asian market and gave prices far higher than the Asian market prices. Traders export goods to the European market for arbitrage. However, the type I base oil arbitrage activity from Asia to Europe decreased significantly in June, which may be due to the limited spot supply in Asia and European prices have begun to stabilize. As for Class III base oils, some Asian refiners are paying close attention to the market. If the arbitrage window continues to open for a period of time, they may allocate more goods to the European or American markets.

In the methyl tertiary butyl ether (MTBE) market, sellers in the Middle East are more keen to sell their products to Europe because the delivery prices in Europe are higher and the shipping costs are similar to Asia. In June of this year, a Middle Eastern producer sold 10,000 tons of MTBE to Europe. The company had previously made some offers to Asia, but no buyers made attractive offers.

In the methyl methacrylate (MMA) market, prices in Europe and the United States are currently much higher than spot prices in Asia, which creates opportunities for Asian exports to Europe and the United States for arbitrage. Due to recent force majeure and unplanned plant shutdowns, tight supplies in the United States and Europe have stimulated demand for goods from Asia and the Middle East. The supply of MMA in Asia is also tight due to the recent peak period of equipment overhaul, and bulk stocks are very limited. However, tight tank containers, high freight rates, and logistics issues currently restrict the export of MMA to the West.

A trader said: “The continued difficulties of tank containers (transportation) will cause large price differences in different regions. Due to freight, the price gap between Europe and Asia will widen.” Due to the off-season demand and the resurgence of the epidemic, Asia’s Demand has slowed down, but in the context of tight supply and rising sales prices to Europe and the United States, Asian MMA suppliers have no incentive to cut prices.

In the butadiene market, after the North American winter storm in mid-February, the supply chain was interrupted, prices were supported, and demand recovered. In the past few years, butadiene trade flows from Europe to the United States and Asia, while Asian styrene butadiene rubber (SBR) flows to the United States. Throughout the butadiene value chain, demand exceeds supply, which makes the United States the most expensive market. On this basis, starting from May, butadiene will be exported from Asia to North America, which may extend to July and August.