Paraffin Wax Prices May Fluctuate Upwards

In 2017, the prices of semi-refined 58C melt point wax first climbed up and then declined. In H1, 2017, the paraffin wax prices kept rising, but the refineries continued to execute the “Baojia” policy in H2, 2017. The paraffin wax prices decreased in H2, 2017 in response to the weak downstream demand.

In H1, 2017, the trading atmosphere at the paraffin wax was active, but the paraffin wax prices kept dipping in H2, 2017.

As seen from the chart, the prices of semi-refined 58C melt point wax kept rising in H1, 2017 and then declined in H2, 2017. From January to June 2017, the semi-refined 58C melt point wax prices averaged at RMB 7,544.02/mt, but the average price of semi-refined 58C melt point wax was RMB 7,127.47/mt, down RMB 416.55/mt. The major reasons were as follows: On the one hand, the refineries’ policies dominated the paraffin wax market. On the other hand, the downstream demand for paraffin wax remained weak.

China is a large paraffin wax producer, and resources are mainly produced by PetroChina’s and Sinopec’s refineries. Resources are sold by PetroChina through the sales mode of “refineries – contractors – small and medium-sized traders – end users”. The Sinopec Shanghai Sales Branch is the sales channel of Sinopec. “4+1” sales pattern dominates China’s paraffin wax market. “4” refers to four refineries of PetroChina (PetroChina Fushun Petrochemical, PetroChina Daqing Petrochemical, PetroChina Daqing Refining & Petrochemical and PetroChina Dalian Petrochemical), and “1” refers to Sinopec Shanghai Sales Branch.

It seemed that the refineries’ policies played a vital role in the paraffin wax price trend. On the one hand, the price downtrend was clear in response to the “Baojia” policy, and market participants held bearish sentiment towards the paraffin wax market. On the other hand, the “Baojia” policy gave some support to the purchasing enthusiasm of contractors, resulting in the consumption for the inventory at refineries. When the inventory at refineries was low, the paraffin wax prices might climb up again. In H2, 2017, the refineries continued to execute the “Baojia” policy, and the paraffin wax prices fluctuated downwards.

In fact, the downtrend of the paraffin wax price in H2, 2017 was mainly due to the poor downstream demand. With the supply-side structural reform carrying out, downstream users conducted the rectification and optimization to the paraffin wax industry. Therefore, the demand for paraffin wax shrank, weighing down the paraffin wax prices.

With the approach of the end of 2017, refineries might complete to the annual planning volume in succession, but the downstream demand for paraffin wax might remain sluggish. Currently, the paraffin wax resources may be largely oversupplied. In recent years, with the supply of paraffin-based crude oil shrinking, the supply of paraffin wax feedstock was limited. In terms of Sinopec, Sinopec’s refineries mainly processed imported high-sulfur crude oil as feedstock. In the long run, the paraffin wax prices may fluctuate upwards.