Weaker Asian markets could suppress recovery of petrochemical industry

Through the economic downturn of 2008-09, the growth in Asian petrochemical markets supported the global petrochemical industry, serving as robust export markets to compensate for slow domestic consumption in many Western markets. However, weaker Asian markets in Q3-10 have raised fears that the recovery of the petrochemical industry could falter or even fall back to a trough, as per Chemsystems. Demand for petrochemicals has been lacklustre during the beginning of Q3 as downstream consumers refrained from buying and prices fell sharply in the early weeks of the quarter. The need to replenish inventories ahead of the peak manufacturing period in August and September eventually improved demand. Supply for most derivatives was generally lengthy, although a major production failure at Formosa’s Mailiao complex in Taiwan caused some local tightness. Imports from the Middle East were more prevalent, despite the higher netbacks available in Europe. The weak market meanwhile depressed prices in July, restricting profitability of regional producers.
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