Introduction: Due to weak downstream end-user demand, the industry entering a traditional off-season, coupled with expectations of increased future supply, the market had generally held a bearish view on ethylene tar. However, last week saw a price increase that deviated from these expectations. The sustained strength of international crude oil provided a strong cost floor and improved market sentiment, creating a market pattern where weak demand coexists with rising prices.
International crude oil prices continued to rise to higher levels during the week, providing strong support for the ethylene tar market and boosting industry confidence. However, downstream demand is quite resistant to current high prices, and demand remains sluggish. Additionally, with Sinopec-SK Wuhan Petrochemical restarting on July 15 and Gulei Petrochemical restarting on July 19, the supply tightness from maintenance has eased somewhat. The market is currently showing a stalemate, maintaining a consolidation trend.
The high-temperature coal tar market has recently shown a mixed trend of gains and losses. Although Shandong and Hebei regions continued to absorb bearish factors, extending the decline, the decline has significantly narrowed. As the end of the month approaches, the new pricing cycle for carbon black begins. Moreover, with the successful implementation of the first round of coke price cuts, coking companies' profit expectations are expected to decline, and some coking plants' operating rates are expected to fall. This is intensifying the supply-demand tension for coal tar. Consequently, driven by essential demand, the Shanxi region took the lead in rebounding this week, earlier than market expectations. Stimulated by this, off-take volume in the coal tar market picked up noticeably, followed by new order price increases in Hebei and Northeast China. The coal tar market has gradually shifted from weak to strong. With limited fluctuations in downstream coal chemical and carbon black plant operations recently, and solid demand support for raw materials, a comprehensive price increase is expected next week.
Carbon black is a major downstream product of ethylene tar. Early this week, carbon black producers held firm in price negotiations, with low-priced sales volumes limited. Downstream buyers adopted a wait-and-see attitude, expecting prices to fall further. After the release of coal tar prices, carbon black companies also showed a firm stance in their offers. Positive factors influenced market sentiment, but new order volumes during the week were average, leading to a deadlock in negotiations between upstream and downstream. With clear upward momentum in raw material prices next week, there is expected room for carbon black prices to remain firm.
Currently, the supply of domestic marine heavy fuel oil is limited, and wholesale distributor inventory decreased. Meanwhile, raw material prices rose supported by cost factors, keeping marine heavy fuel oil costs firm. Wholesale prices of marine 180CST have risen accordingly. With crude oil at high levels, costs are expected to remain firm, and the cost of marine fuel raw materials may continue to rise slightly. At the same time, finished 180CST resources are relatively tight. Wholesale prices of 180CST are expected to rise, with the main transaction range estimated at 5450-5650 RMB/ton. The main wholesale supply region remains the Shandong area. Due to the recent uptick in marine fuel prices, some midstream and downstream enterprises are locking in orders based on essential demand and gradually taking delivery. Wholesale distributors are mainly fulfilling previous contracts, and ex-warehouse volumes for marine heavy fuel oil may increase.
The main downstream for coating asphalt is anode materials. Downstream battery cell manufacturers will prepare inventory in advance for the peak season, leading to favorable demand for anode materials and supporting their prices. Coating asphalt prices remain mostly stable, with production rates satisfactory.
Supply: Sinopec Yangzi Petrochemical entered maintenance on May 5, 2026, Hainan Refining & Chemical on June 6, and Shenghong Petrochemical on June 25. Sinopec-SK Wuhan Petrochemical restarted on July 15, Gulei Petrochemical restarted on July 19. Maoming Petrochemical and Jieyang Petrochemical switched to internal use in June. Guangxi Petrochemical uses two-thirds of its production internally. Ethylene tar supply is expected to increase in late July as units restart. However, with crude oil currently at high levels, it is possible that ethylene plants may substitute some naphtha with light hydrocarbon feedstocks, potentially reducing (ethylene tar) yields.
Related Products: Carbon black is supported by positive cost factors. Moreover, the downstream tire market is also in the negotiation phase, with increased purchasing interest. Supported by these positive factors, new carbon black orders are expected to rise. Marine fuel costs are expected to remain firm, and resource supply is constrained, so marine heavy fuel oil prices are expected to continue a slight increase. On the supply side of high-temperature coal tar, further rounds of coke price cuts are expected, putting pressure on coking companies' profits. Consequently, operating rates may decrease, leading to expectations of reduced coal tar output. As the floor price for coal tar becomes clearer, downstream purchasing sentiment has improved. Coupled with the fact that coking plants currently have no significant inventory pressure, multiple factors together support the market.
Short-term Outlook: The main trading logic in the international crude oil market has changed. Positive factors stem from the instability in US-Iran relations, the possibility of Israel re-entering the conflict, the suspension of navigation through the Strait of Hormuz, and the Houthi sea blockade against Saudi Arabia. Negative factors include the possibility of further negotiations between the US and Iran, weak demand, and increased expectations of US Federal Reserve interest rate hikes. Currently, the risk of further escalation in the US-Iran conflict remains, and disruptions to navigation through the Strait continue, increasing risk concerns.
International crude oil is fluctuating upward. On one hand, it solidifies the cost floor for petrochemical by-products. On the other hand, it effectively improves pessimistic market sentiment. Observing this week's market trends, by-products of ethylene cracking, such as C5 and C9, have already taken the lead in price increases, with the industry chain sentiment continuing to recover. Current ethylene tar transactions are primarily driven by downstream essential demand, following the overall trend of the industry chain, and there is an expectation of upward movement in the future.
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