Paraffin Wax Prices Kept Climbing

SCI99 Edit at: 2017/9/11 13:08:01
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Following the uptrends of paraffin wax prices at PetroChina’s and Sinopec’s refineries in August, China’s paraffin wax kept climbing by RMB 100/mt in September. The average price of semi-refined 58C melt point wax was RMB 7,412.5/mt, up 0.9% from last month and 15.8% from last year.

In mid-August, as refineries stopped executing the “Baojia” policy ahead of schedule, China’s paraffin wax price started to rise continually. Meanwhile, traders held positive attitude towards the paraffin wax market, and the trading atmosphere was active.

According to SCI, posted prices of semi-refined 58C melt point wax were RMB 6,800–7,100/mt in northeast areas. Most producers controlled sales volume, as a result, it was tough for traders to purchase goods. Meanwhile, according to the data from SCI, the export volume of paraffin wax was 40kt in July, up 50.6% from last month. Besides, market participants thought that the export market of paraffin wax would be improved in September in response to the clear uptrends of paraffin wax prices, easing the supply-demand imbalance further.

The inventory at refineries was the main influence factor to the price trend. According to the chart, the inventory was at a low level when prices at refineries increased. Major reasons were as follows: First, as the paraffin wax prices kept falling, most market participants held wait-and-see sentiment towards the paraffin wax market, and traders and downstream users purchased on a need-to basis. Second, the paraffin wax prices satisfied the expectations of traders, and most traders stocked up for export, giving support to the paraffin wax market.

As shown above, the operating rate at refineries was around 65%, which was lower than that in former years. Main reasons were as follows: First, units at PetroChina Daqing Petrochemical, PetroChina Daqing Refining & Petrochemical and PetroChina Lanzhou Petrochemical ran with incomplete loads. Second, output of paraffin wax at Sinopec Shanghai Gaoqiao Company and Sinopec Maoming Company whittled away due to the high-sulfur crude oil. Third, according to the refineries, all units at Sinopec Shanghai Gaoqiao Company were shut down for maintenance from September 1 for two and a half months. If output of paraffin wax at northeast refineries remains low, the supply of paraffin wax will further decrease.

As the domestic refineries didn’t take overhauls intensively, the operating rates were over 70%. Output of paraffin wax at PetroChina Daqing Petrochemical was cut by 5kt, and that at PetroChina Lanzhou Petrochemical and Sinopec Jingmen Company decreased due to the tight supply of raw materials. Meanwhile, Sinopec Shanghai Gaoqiao Company, Sinopec Maoming Company and PetroChina Dalian Petrochemical arranged most products for export, tightening the domestic supply of paraffin wax further.

According to the refineries, resources remained insufficient. As the inventory continued to be low, some refineries had to control sales volume. On the one hand, resources at refineries were insufficient, and market speculations increased. Market participants adopted positive attitude to the paraffin wax market. On the other hand, downstream users started to purchase goods, and the trading activity improved. Thus, traders were active in purchasing and started to stock up. On the whole, as traders were active in purchasing, the limited paraffin wax resources were dispersive. Market speculations rose obviously.

In September, the uptrends of paraffin wax prices were clear in response to the insufficient resources and the increase of market speculations. Traders were active in stocking up, however, most traders still held cautious sentiment to the paraffin wax market. Given the environmental protection inspection and illegal building demolition, the demand for paraffin wax dropped. Besides, traders were cautious about their operations due to the unstable price trend of paraffin wax. In H1 September, traders will be active in purchasing in order to complete the sales plans. In the theory, the demand for paraffin wax from export market and domestic downstream users will improve in September. SCI predicts that the paraffin wax prices at refineries may keep rising.

Remarks: “Baojia” policy means that consumers buy at posted prices, and discounts will be made at the end of the month when settlement prices are issued. It indicates a bearish market trend.

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