Geopolitical tensions, tight supply keep Asia petrochemical prices elevated

Petrochemical markets in Asia have risen due to limited production and increasing feedstock costs, with a tight supply expected in September. A cautious demand recovery could occur in China during pre-holiday restocking, and during India's monsoon season end. Restocking is likely in China ahead of the week-long holiday in October.

Ethylene derivative markets have mixed prices, with PE and MEG performing better. Supply pressure raises ABS prices despite weak consumption. Geopolitical tensions between the US and Iran continue to affect prices, with Brent prices initially climbing above $90/barrel before easing to around $87/barrel. Demand from ethylene derivatives like EO, ethylene glycols, PE, and EPDM has surged, but buyers have been cautious due to rising upstream costs and tight feedstock availability.

Propylene import prices in northeast Asia have increased due to higher crude oil values, tight regional availability, and gains in China's domestic market. Some derivative producers have reduced operations, while integrated producers consider lowering propylene production if the uptrend continues. Southeast Asian propylene prices have also risen as spot cargoes remain scarce, but sluggish PP sales limit buyer ability to accept higher offers.

Supply could improve in the second half of September if facilities in Malaysia and Thailand restart. Aromatics prices have lifted due to higher crude costs, with ABS prices reaching their highest levels in two to three months, particularly in China's domestic market. Higher styrene monomer (SM) costs have pushed up acrylonitrile butadiene styrene (ABS) prices, but production cuts and limited availability restrict near-term ABS supply.

China's toluene exports more than doubled year-on-year in July, driven by strong overseas demand and favorable export arbitrage. Monoethylene glycol (MEG) prices have closely tracked crude prices, with acute supply tightness despite reduced demand following output cuts from downstream sectors. Coal-based plants in China are running at full capacity, while downstream polyester and PET producers have reduced output to manage feedstock shortages.

EVA import prices in Asia have been stable-to-firm, with producers attempting to transfer increased ethylene costs to buyers. Methanol prices have risen across Asia due to Middle East supply constraints from the US-Iran conflict. Southeast Asian prices have increased due to tight availability, with Malaysian and Taiwanese plants affected by outages.

In China, methanol values have risen alongside domestic futures prices, with demand potentially gaining seasonal support in September as Chinese buyers typically procure material ahead of the National Day holiday.