Asia's plastics industry is in trouble at a time when progress in the us-china trade war has stalled

- Nov 22, 2019-

With the us-china trade dispute stalling and Asian petrochemical markets still weak, sentiment has turned bearish, especially towards the end of the year, with buyers also looking to keep inventories low.33. JPGPurchases of acrylonitrile-butadiene styrene (ABS) imports remained tepid in the traditionally sluggish fourth quarter.Some sellers acknowledge that there could be a limited improvement in demand in the short term, as production this year is largely complete.While margins are still adequate so far, resin suppliers remain concerned that profitability could be eroded in the short term if the ABS market weakens significantly.In the case of paraxylene (PX), Asian PX producers face higher costs, coupled with steady to weak demand in downstream markets, resulting in producers continuing to face a squeeze on production margins.The relatively stable cost of naphtha as a feedstock, coupled with the low price of benzene as a by-product, has put pressure on aromatics producers to reduce costs.Although the PX plant continues to shut down and the supply of quick pickups is limited, the price increase is largely offset by resistance from end-users."Demand is constrained and PTA downstream production margins are under pressure.Demand for polyester has slowed due to the adverse global macroeconomic outlook, "said one industry insider.Demand for high-shun polybutadiene rubber remains weak due to the downturn in the auto industry.Spot trading has been constrained by an uncertain market outlook and lower prices for the raw material butadiene (BD).A rise in natural rubber (NR) prices helped to boost and support sales interest, with leading PBR manufacturers in Asia keeping their offer unchanged despite generally weak demand.Further downstream, Asian acetic acid prices extended last week's decline to levels seen around may and July;Oversupply in China has led suppliers to cut export quotes to levels last seen around early July 2019, when 85 percent of China's factories were operating at an average rate below 89 percent.Looking ahead, the shortage of acetic acid supply after the shutdown and overhaul of most factories this year, coupled with the premium of acetic acid price over methanol raw material cost in China, may continue to restrain the market.As for MEK, in a slowing economy, downstream buyers in Asian markets are more willing to buy on a need-to-know basis and are not willing to take any risks in volatile markets.In China's polyethylene (PE) market, deals are limited and a plentiful supply of competitively priced imported goods drives down prices in the local market.Distributors have cut their prices and local producers have adopted a more moderate pricing policy, lacking confidence in the outlook as expectations of higher demand in November ahead of the lunar New Year in January 2020 have not materialised.Last week, there was hope that us-china trade optimism was loosening its grip on global markets.The US President has commented that there are no plans for tariffs against China to fall and that the oil market will be disappointed as the likelihood of a new trade deal with China diminishes.China sold 2.28m vehicles in October, down 4 per cent from a year earlier, according to the China association of automobile manufacturers (CAAM), reflecting the country's slowing economic growth.Total sales in the january-october period fell 9.7 percent from a year earlier to 20.65 million vehicles, according to CAAM.