China's Paraffin Wax Price Rebounded

According to the chart, the market downtrend was clear due to the “Baojia” policy. However, the price of paraffin wax was higher than that in the same period of last year. According to SCI, the average price of semi-refined 58C melt point wax was RMB 7,116.25/mt, down 2.6% MOM but up 8.7% YOY. Traders took goods ahead of schedule, as the “Baojia” policy assured the paraffin wax price within a month.

With the supply-demand imbalance was more obvious, traders showed poor interest in purchasing. As units at refineries were shut down for maintenance intensively in 2017, the output of paraffin wax from January to July was 767.9kt, down 10% YOY. The market speculations increased in response to the tight supply.

According to the downstream users, the demand for paraffin wax was stable. However, the inventory at traders was high due to market speculations and stock-up sentiment. According to the refineries, the inventory was at a low level, and some refineries controlled sales volume. Resources at PetroChina’s refineries were mainly 58C melt point wax, and the inventory remained low. Sales at Sinopec’s refineries were good. According SCI’s statistics, the total inventory was 13kt or so, down 43% MOM and 40% YOY.

PetroChina Daqing Petrochemical and PetroChina Refining & Petrochemical ended the “Baojia” policy ahead of schedule, giving support to the trading activity somewhat. Meanwhile, most traders intended to buy on the dips. The supporting factors were as follows: First, in the theory, the consumption for civil-use candle would enter peak season in October, and most traders needed to stock up before August and September. Second, influenced by the former downtrend, most traders and downstream users consumed inventory. The social inventory decreased. Third, as most trader stocked up for export, the supply-demand imbalance might be eased somewhat.

With a large number of speculations, there were a lot of influence factors in the paraffin wax market. The downstream demand for paraffin wax was stable due to the environmental protection inspection and illegal building demolition. However, given the bullish factors, most traders intended to buy on the dips. SCI predicts that most downstream users may stock up due to the market speculations. With the inventory at refineries keeps dipping, the price of paraffin wax may rebound.

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.