China's Overall Paraffin Wax Prices Climbed

Up to November 23, prices of China’s semi-refined 58C melt point wax averaged at RMB 6,953.75/mt, up RMB 484.85/mt or 7.5% from 2016. In 2017, the overall paraffin wax prices went upwards. It is predicted that the output of paraffin wax at PetroChina and Sinopec will drop in 2017, and the paraffin wax prices at PetroChina and Sinopec will go to the same direction.

The output of paraffin wax shrank in South China and North China, and the market proportion remained obvious.

Seen from the above chart, up to November 20, the output of paraffin wax at PetroChina was 873.5kt, down 5.7% from 2016, and that at Sinopec was 271.6kt, down 3.9% from 2016. It is predicted that the total output at refineries in South China and North China will drop. The reasons were follows: On the one hand, PetroChina’s refineries intensively entered down time, resulting in the decrease of the paraffin wax output. On the other hand, influenced by the shortage of the feedstock, the output of paraffin wax further shrank. SCI predicts that most participants will pay close attention to PetroChina’s refineries.

According to above chart, the overall paraffin wax prices in 2017 were higher than those of 2016. With the approach of the end of 2017, the paraffin wax prices fell back to a low level.

All the time, the paraffin wax prices at Sinopec’s refineries were higher than those at PetroChina’s refineries. So did those in 2017, and the major reasons were as follows:

First, as for the demand for paraffin, the downstream users in South China had strong demand for paraffin wax. Therefore, Sinopec took the geographical advantage, and the cost of transportation was low. However, as PetroChina arranged around most resources for the southern market, taking up about 80% of the total output, the cost of transportation was high, and the paraffin wax prices were lower than those at Sinopec.

Second, in terms of the paraffin wax resources, the resources at PetroChina were ample, and the production was relatively stable. Meanwhile, resources at PetroChina’s refineries were low melt point wax. Besides, resources at Sinopec’s refineries were high melt point wax.

The paraffin wax remained high due to the insufficient resources.

According to the chart, the paraffin wax prices climbed from January to April, the main reasons were as follows:

On the one hand, the sales for paraffin wax performed well during the Spring Festival holiday, and the inventory at refineries was low, resulting in the insufficient resources. The supply of paraffin wax was tight in response to the overhaul plan. On the other hand, supported by the consumption peak season for candles, downstream users showed strong interest in purchasing resources, giving support to the increase of paraffin wax prices.

The price spread enlarged due to the different sales policies.

The price spread between PetroChina and Sinopec enlarged from August mainly because of the different sales policies. PetroChina’s refineries executed the “Baojia” policy in July, and the settlement prices dropped by RMB 200–2,000/mt, meanwhile, PetroChina Daqing Petrochemical and PetroChina Daqing Refining & Petrochemical executed the “Baojia” to the end of August. Most Sinopec’s refineries maintained stable prices, and some refineries slightly raised the prices of slack wax.

China’s paraffin wax price downtrend was clear.

In November, PetroChina’s refineries executed the “Baojia” policy, and the downtrend of paraffin wax price was clear. The paraffin wax price might reach the lowest point of 2017. On the one hand, the export market of paraffin wax is sluggish. On the other hand, the domestic downstream demand for paraffin wax is weak. SCI predicts that the paraffin wax prices will remain stable, and refineries may continue to execute the “Baojia” policy.

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.