China's chemical industry is struggling to recover from the impacts of the COVID-19 pandemic and economic slowdown. Key points from the document: - China's industrial output dropped 14% in the first two months of 2020, with the chemical sector declining 21% in output and 66% in profits. - While China has controlled the virus spread, weak global demand is delivering its economy a second blow as exports fall. - Falling exports and rising inventories pose major threats to China's chemical and petrochemical growth prospects. - The global economic recession means China's chemical sales will be impacted further this fiscal year.

1. ChinaStrugglingtoRecover,VulnerabletoSputteringEconomyandRisingInventories
Key Headlines
• Another Utah refinery enters into production of ‘Tier 3’ fuel
• Whiting Petroleum falls as U.S. shale producers opt to close rigs
• Naphtha falls below LPG, feedstocks collapse in Europe
• Asia’s naphtha dips lowest since 2008
• OPEC to hold a conference on Monday, oil price collapse to be discussed
Southeast Asia Chemicals Pricing (Key Products)
• Ethylene: Ethylene prices continued to drift in Southeast Asia amid bearish market sentiments and falling crude
prices. CFR prices for Ethylene in South East Asia were assessed at $ 440/ tonne, down by $ 20/tonnes.
• Toluene: Weak downstream demand as result of production cuts and shutdown to curtail the spread of
Coronavirus has further pulled down the prices of Toluene to $ 370/tonnes CFR India.
• Phenol: Phenol prices tumbled in Southeast Asia as an outcome of sluggish market sentiments as major
economies are facing slowdown. CFR Prices of Phenol were assessed at $ 750/tonne, down by $20/tonne.
• Styrene Monomer: Styrene prices in Southeast Asia edged marginally high amid recovery in downstream
demand for the product. Prices of the product were assessed at $ 540/tonne, up by $30/tonne.
Crude Oil Scenario
On Friday, crude oil observed an astonishing drift after
witnessing a much-awaited gains post the U.S. President
Donald Trump’s triumphant tweet on Thursday. This fall in
oil prices is an indication of market skepticism over the
deal to settle Saudi and Russia price war without emphasizing on the oil production scale of U.S. The situation may force
the U.S. shale producers to believe that majors want to dominate the issue so they can remove smaller rivals in the
country’s biggest shale basins, including the Bakken and the Permian, in Texas and New Mexico. The efforts made to
resolve the price war is of no use until U.S oil production is also examined to stabilize the market in times of concerns
over global economic recession. Consequently, Brent crude futures recorded a fall by 3.27 per cent and was assessed
at $28.96 per barrel while WTI crude slumped by 4.46 per cent to $24.19 per barrel.
Index Units Price
WTI Crude Oil (Nymex) USD/bbl. 24.19
Brent Crude (ICE) USD/bbl. 28.96
Natural Gas (Nymex) USD/MMBtu 1.650
Edition: 4th April 2020 #TheChemAnalystExpress

2. Exclusive News & Analysis
After Pandemic woes, China’s chemical industry ambitious to emerge stronger
After a prolonged nationwide lockdown to contain the spread of novel coronavirus, Chinese chemical sector is preparing
for a comeback. This can be sensed from the pace with which Chinese players have resumed operations in their factories
in March following widespread shutdowns that led to closure of several factories backed further tensed by extended
supply chain disruptions.
Although the country seems to have controlled the virus transmission to a greater extent, the global economic
slowdown is delivering it a second blow. With no new positive cases for weeks, China seems to have triumphed in
controlling the transmission when rest of the world is struggling to control the community spread by imposing
lockdowns. However, the undue halt in operations and weak demand has put a deeper dent to China’s Chemical
industry which seems to
China’s Industrial output and Manufacturing Index
According to a latest report issued by the National
Bureau of Statistics of China, encompassing all the
sectors, China’s industrial output dropped by 14% in the
first two months of 2020, compared to the last fiscal
year, and profits slumped by 39%. Chemical
manufacturing was among the hardest-hit sectors, with
output declining by 21% and profits by 66%. Although
operations started resuming appreciably in the month of
March, industrialist believe that lack of international
orders has forced the players to implement output cuts.
Production activities in the world’s second biggest
economy which can be measured in terms of the China’s
manufacturing purchasing managers' index (PMI) for March rose to 52.0 - the highest since September 2017 - from a
record low of 35.7 in February 2020. It is anticipated that since most of China’s end-products are meant for exports,
their demand would further dissipate now that the global economy is already slipping into a recession. As per the recent
interview by an official from Zhongxiang, a phosphorus chemical industry, that manufacturers are facing raw material
and logistics constraints in addition to difficulty implementing environmental protection rules.
Global Demand Outlook
The lockdowns and quarantine measures in Western part
of the globe have led to drop in demand for a wide range
of Chinese-made goods, including phones, toys, and
clothes. This has already led to bankruptcies and
shutdowns of export-oriented plants in the coastal parts
of China. Till now, China leads the world in chemical sales
with a greater dependency of major economies over its
manufacturing sector. However, analysts believe that
the current situation can be a game-changer as
worsening overseas situation is another blow to
country’s total chemical sales in this fiscal forcing world’s
30
35
40
45
50
55
30
35
40
45
50
55
Jan'19
Feb'19
Mar'19
Apr'19
May'19
Jun'19
Jul'19
Aug'19
Sep'19
Oct'19
Nov'19
Dec'19
Jan'20
Feb'20
Mar'20
Caixin China Manufacturing PMI
50.1
0
200
400
600
800
1000
1200
1400
ChemicalSalesin2018(€Billlion)
Source:Cefif Chemdata

3. industrialists to re-think upon concentrated supply-chain issues. While others anticipate that there is a strong possibility
of a quick V-shaped recovery in the coming months indicating a strong rebound in China’s growth from the second
quarter of 2020.
Falling Exports, A Major Threat
For PE and PP, huge inventory pileups have created a pressure over petrochemical players. Increased inventories at
ports for MEG, styrene, benzene, xylene, and many others pose a major threat to China’s chemical and petrochemical
growth. Slump in crude oil prices in has given hope to the country’s manufacturing sector which is gazing at better
margins as production activities improve especially among naphtha-based polyolefin and ethylene glycol producers.
Methanol, benzene and PTA experience strong downfall in prices following the crude-crash.
Industry Research
International Plant Shutdown News
• JXTG Nippon Oil Energy to shut crude distillation Unit for scheduled turnaround
JXTG Nippon Oil and Energy Corporation is a renowned petrochemical company engaged in the manufacturing and
sales of petrochemical products. The company has announced a scheduled turnaround in its crude oil distillation unit
at Kawasaki refinery having a plant capacity of 235000 barrel/day of crude oil. The turnaround is anticipated to take
place by late April till mid of July.
• Sinopec Tianjin Petrochemical to go for Maintenance Shutdown
Sinopec Tianjin Petrochemical located in China is one of the major companies of the country engaged in
petrochemical manufacturing. The company has reported a maintenance shutdown in its crude distillation unit
(CDU)unit having a 2.5 Million MTPA from late April till July.
India Plant Shutdown News
• Haldia Petrochemicals announced turnarounds in PE and PP units
Haldia Petrochemicals, a major petrochemical company in India has halted operations its Polyethylene units having a
capacity of 330KTPA for HDPE and 370 KTPA for LDPE. Moreover, it has also announced shut in operation of
Polypropylene units with a capacity of around 350KTPA. This shut down is in compliance to the initiatives taken by the
Indian government to constrain the spread of Covid-19.
Strategic Expansions and Global Footprints
• Synthomer Plc announced acquisition of Omnova Solutions
Synthomer Plc, a renowned company with headquarters in UK, dealing in specialty chemicals has announced the
acquisition of Omnova Solutions which is engaged in manufacturing of emulsion polymers and specialty chemicals.
The purpose of this acquisition is to strengthen Synthomer’s presence globally and to provide it a strong platform for
future stability and growth.
Latest Technological Investments
• Mitsubishi Consortium proposed recycling of CO2 for Methanol Production
Mitsubishi Consortium consists of several companies selected by New Energy and Industrial Technology Development
Organisation for research activities on carbon recycling and its conversion into methanol .The recent process
technology will work in obtaining a mixture of CO2 and hydrogen which will be further processed for methanol
production by going through a number surveys and tests. Mitsubishi Gas Chemical company will serve as
technological partner and provide supply chain expertise related to synthesis catalysis and methanol production.

4. Monthly Analyst View
ChemAnalyst expects softness in the demand of majority of bulk chemicals and petrochemicals globally in the coming
weeks as the coronavirus impact is set worsen the economic situation. However, global consumption of feedstocks,
intermediates, polymers, and elastomers is expected to recover by the second half of 2020 assuming that India and
China show signs of economic recovery by then. Combined with worst crash in crude oil, and unjust volatility in the
markets, there is a significant pressure on creditworthiness around the world. Consumer spending is anticipated to be
the major concern as unemployment figures would rise as youngsters fear job losses due to economic downturn.
How chemical Industry will respond to the pandemic?
APAC polyethylene and polypropylene demand is expected to recover from June 2020 onwards. Major producers
announced price decreases for feedstocks such as methanol, styrene, benzene, and naphtha in March. Methanol
contract prices decreased by about USD 3000 per tonne in Q1 of 2020. Due to plummeting demand, ChemAnalyst
anticipates that consumption of ethylene, propylene and butadiene could be impacted in the second quarter of 2020
as there has been a substantial reduction in manufacturing activity across several countries which adopted lockdown
measures as to restrict the spread of the coronavirus.
Market Impact Analysis: April
Growing demand of raw materials used for manufacturing of cleaning chemicals, disinfectants and hand wash are saving
grace for companies like Dow Chemicals, BASF, Evonik, Arkema and Huntsman. More and more companies have entered
into manufacturing IPA, Ethanol, Acetone, Hydrogen Peroxide and Peracetic acid. All major producers are planning to
expand their capacities by debottlenecking or changing their product line so that incremental demand of these
chemicals can be fulfilled. Diageo and Pernod Ricard have started producing disinfectant from denatured ethanol,
glycerol and hydrogen peroxide in their manufacturing facility in Europe and Asia Pacific region.
“The outbreak of the novel coronavirus in USA, Italy, France, Germany, United
Kingdom could be seen as an opportunity than a threat for countries like China and
India to consolidate their position in the global chemical & petrochemical market.
Companies from these countries should analyze their peers from Europe and North
America and explore new markets for better supply-chains.”
Jaideep Kumar
Senior Analyst – ChemAnalyst
jaideep@chemanalyst.com
Product Sector Impact
Petroleum Products: HSD,
Gasoline, ATF and Natural Gas
Transportation, Aviation, Agriculture,
Utilities
High (Demand to decline by 25-29%
in 2020)
Feedstock: Methanol, Styrene,
Ethylene, Propylene, PTA &
MEG
Polymer, Fibre, Furniture, Pharmaceutical
Medium (Only healthcare, technical
textile, packaging industry likely to
outperform)
Elastomer & Rubber Automotive, Heavy Engineering
Worst affected and demand is likely
to dive by 45-50% in coming months
on YoY basis
Specialty Chemicals
Cleaning Chemicals, Hand Sanitizer,
Disinfectant, Dyes
Outperform, globally there is product
shortage due to surge in demand
from countries infected by Covid-19
Source: ChemAnalyst Analysis

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