Paraffin Wax Supply-Demand Relation May Ease in Oct
Preface: Following the National Day holiday, the paraffin wax market has experienced fluctuations driven by disparities between demand expectations and reality, intertwining market sentiment with fundamentals. As the holiday period concluded, clear signals from paraffin wax producers indicated a stabilization in prices, maintaining relative market activity.
In the traditional peak demand season of September, most products historically saw price increases. However, in September this year, downstream demand for paraffin wax fell short of expectations, leading to a 6.4% year-on-year decline in the monthly average price, below the level of the same period last year. In October, increased cost support and planned maintenance or relocations of domestic paraffin wax producers have tightened supply, contributing to a moderation in the supply-demand relationship and supporting a price rebound.
On October 1, PetroChina adjusted the prices of semi-refined and slack paraffin wax down by RMB 450/mt, while fully refined prices remained stable. During the National Day holiday, as prices met the expectations of some traders and cost support became evident, market participants increased their restocking activities, boosting market transactions and maintaining a high level of trading activity, further supporting the release of stabilization signals post-holiday.
After the holiday, producers raised paraffin wax prices flexibly by RMB 50-100/mt, signaling a clear halt in price declines. The mindset of buying on the rise rather than on the dip, coupled with the coming of the traditional peak demand season for downstream markets, led to increased restocking enthusiasm among some downstream plants, widening the price increase range.
Currently, the ongoing supply-demand interplay in the paraffin wax market, and the average price for semi-refined 58C wax was RMB 7,982.5/mt, reflecting a 2.77% increase from the year’s low. Overall, the market price has trended upwards. Expectations for price increases remain prominent, with statistics indicating that from January to October 2024, the average price for semi-refined 58C wax has been RMB 8,004.9/mt, up 0.6% year-on-year from 2023.
Typically, the paraffin wax prices rise from September to November, with indices above 1, whereas December sees indices below 1, indicating a downward trend. Historical data suggests that the paraffin wax market generally experiences more years of price increases in the first and fourth quarters compared to declines, with second and third quarters showing a weaker trend, highlighting seasonal characteristics. Price changes are closely tied to market demand, with downstream manufacturers and exporters stocking up ahead of Christmas, the Spring Festival, and Qingming Festival, thereby supporting higher prices in the first and fourth quarters. Expectations for price increases remain in the paraffin wax market, with October price trends anticipated to align with seasonal characteristics.
Supply Analysis:
Under normal circumstances, China’s paraffin wax monthly supply should hover around 140kt. However, in October 2024, considering the impact of maintenance and relocation plans at domestic refineries, paraffin production is expected to be around 133kt, reflecting a month-on-month decline of 5% and a year-on-year decline of 7.7%. In November, Sinopec Maoming Petrochemical is expected to be shut down, while Dalian Petrochemical is relocating. So it is predicted that the production will be approximately 125kt in November, a 6% decline month-on-month. Currently, some resources from PetroChina’s northeastern refineries remain tight, maintaining certain support for the market.
Demand Analysis:
Although China’s paraffin wax market demand has shown year-on-year contraction this year, macroeconomic adjustments and a series of pro-cyclical policies—particularly in real estate and infrastructure—are gradually boosting market confidence. As downstream demand enters the traditional peak season, restocking needs among traders may strengthen, providing support for paraffin wax market transactions.
Overall, market sentiment among traders may be optimistic. While the ongoing supply-demand interplay indicates contraction in year-on-year demand, the clear stabilization signals from the market have led to an evident bullish expectation among traders.
The short-term supply gap in the paraffin wax market remains evident. Current domestic paraffin resources are primarily concentrated in PetroChina’s northeastern refineries, where procurement remains challenging, indicating a potentially tight supply situation. On the demand side, some downstream enterprises show signs of increasing low-price restocking needs, further buoyed by the arrival of the traditional demand season. There may be a clear bullish outlook from traders. In summary, the ongoing supply-demand interplay suggests that with rational production and sales pressure and tighter supply expectations, short-term upward price potential for the paraffin wax market remains.
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