Paraffin wax CAS NO. 8002-74-2 Review and Forecast Analysis

【Price Review】
In July, domestic refinery paraffin prices increased flexibly by $16 to $62 per ton. By the end of July, the average price of the mainstream model 58# paraffin in domestic refineries rose by 1.08% month-on-month, while it decreased by 7.67% year-on-year.

【Market Supply】
The overall capacity of domestic refineries for paraffin remains stable, although certain resources are tight, with no new plans for expansion in recent years. This month, two large refineries in China have halted their paraffin production units, while other refinery operations are running smoothly. The inventory levels at refineries are low, and the difficulty in securing resources continues to be apparent.

The domestic capacity for paraffin remains stable, with an output of 141,500 tons in June 2024, reflecting a month-on-month increase of 9.44% and a year-on-year increase of 8.68%. The primary reason for the month-on-month and year-on-year rise in paraffin production in June is attributed to maintenance work at the paraffin units of large factories in northern China. In June, the operating load of the paraffin market was at 82.4%. Statistics show that from January to June, domestic paraffin production totaled 810,000 tons, reflecting a year-on-year decrease of 2.06%. Currently, there are no new or phasing-out plans for domestic refinery paraffin capacities, and changes in domestic paraffin output will primarily fluctuate based on the maintenance status of the units and the supply situation of Daqing crude oil. It is expected that paraffin output in July will be around 140,000 tons.

【Demand Side】
Demand remains steady overall. Despite it being the off-season, retailers were quite active in replenishing stocks in the early to mid-month period. As we approach the latter part of the month, consideration of limited demand follow-up alongside rising costs has led to a decline in purchasing enthusiasm. The main refining factory’s total inventory of paraffin wax is around 11,000 tons, reflecting a month-on-month decrease of 15.38%. This month, the paraffin wax market continues its upward trend. In the early to mid-month period, the trading atmosphere in the paraffin wax market was predominantly positive; the off-season is not as sluggish as expected. With a clear expectation of rising domestic refining factory listing prices for paraffin wax, the mentality to buy on the rise rather than on the decline has increased the psychological tendency among traders to stockpile while being reluctant to sell, resulting in lower inventory levels at production refining factories. Additionally, challenges remain in sourcing certain grades, further enhancing speculative sentiment in the market.

【About Repertory】
In terms of inventory, it has decreased, with the total stock of primary refinery paraffin being approximately 11,000 tons, reflecting a month-on-month decline of 15.38%.

【Statistics on domestic imports of paraffin】
China has limited resources for imported paraffin, which has a minimal impact on the domestic paraffin market. According to statistical data, for June, the import volume was 840.9 tons, reflecting a month-on-month increase of 41.93% and a year-on-year increase of 30.82%. The imported paraffin in June was primarily sourced from Malaysia and Japan.

【Statistics on domestic exports of paraffin】
1. In June, China’s paraffin wax export volume reached 47,200 tons, marking a low point for the year and accounting for 33.36% of the total output in June. The month-on-month export decrease was 12.42%, while the year-on-year decline was 29.87%. The primary reasons for the simultaneous decrease in both month-on-month and year-on-year export volumes are, on one hand, the poor domestic market outlook for paraffin in June, with prices adjusting flexibly. Additionally, the overseas demand has seen no significant improvement, leading to a cautious mindset among foreign buyers, preferring to buy on the rise rather than on the fall. On the other hand, rising shipping costs, difficulties in sourcing containers, and extended shipping schedules have increased cost pressures, dampening domestic businesses’ enthusiasm for procurement. The average export price in June was between $1,140 and $1,150 per ton, reflecting a month-on-month decrease of 3.18% and a year-on-year decline of 4.09%. From January to June, the cumulative export volume of paraffin reached 317,400 tons, representing a year-on-year decline of 20.46%. It is expected that in July, domestic paraffin export volumes may be around 50,000 to 60,000 tons.

2. Regarding the statistical data on paraffin exports by trade method, the export data for June showed little variation compared to previous months, with general trade and processing trade being the primary methods. General trade holds a dominant position with an absolute advantage, with an export volume of 42,300 tons, constituting 89.5% of the total, and a month-on-month decline of 4.25%. The main resources for this trade originate from PetroChina’s Northeast refineries. The export volume for processing trade was 4,700 tons, representing a substantial month-on-month decline of 51.8%, accounting for 9.95% of the total export volume.

3. In terms of paraffin export data classified by origin and destination, the statistics for June showed little change from the previous month. Liaoning Province continued to dominate with a significant lead, exporting 20,800 tons, which is a month-on-month increase of 0.77%, accounting for 44.2% of the total export volume. Shanghai ranked second with a month-on-month decrease of 13%. Guangdong Province secured the third position with an export volume of 6,400 tons, marking a month-on-month increase of 3.28%.

4. Statistics on Paraffin Exports (by Trading Partners): In June, China exported paraffin to 78 countries and regions, with Mexico remaining the top destination, accounting for 14,600 metric tons, which represents 30.95% of total exports. This figure reflects a month-on-month decrease of 6.04% and a year-on-year decline of 18.36%. Vietnam ranked second with an export volume of 4,700 metric tons, constituting 9.95% of total exports, also showing a month-on-month decrease of 6.04% and a year-on-year drop of 18.4%. Myanmar placed third with a month-on-month export decline of 3.13% and an overall reduction of 89%. In the United States, the demand for paraffin this month was 876 metric tons, a striking year-on-year decrease of 92.5%, indicating a significant contraction in demand. In June, the three key flow directions for China’s paraffin exports were predominantly to North America, led by Mexico and Guatemala, accounting for approximately 36% of total exports; Southeast Asia, centered around Vietnam, Myanmar, and Thailand, which made up around 25% of total exports; and Europe, represented by Poland, accounting for approximately 6% of total exports. This month, the demand for paraffin in the European region showed a year-on-year decline.

5. Paraffin export data for June 2024 (by top 10 trading partners) is illustrated in the following chart:

6. Statistics on paraffin wax consumption in June 2024:
In June of this year, China’s apparent consumption of paraffin wax increased both month-on-month and year-on-year. The fluctuations in domestic apparent consumption are directly related to production and export volumes. The ongoing supply-demand dynamics in the paraffin wax market are maintained; however, demand has not sufficiently followed up, leading to a contraction in the export market. It is anticipated that the apparent consumption of paraffin wax in July will be around 80,000 tons.

7. Analysis of export volumes for downstream paraffin wax products (candles) is detailed in the table below:

China is one of the world’s largest exporters of candles, primarily focusing on craft candles for markets in Europe and North America, and mainly exporting illumination candles to African countries. According to statistical data, the candle export volume in June reached 32,600 tons, with a month-on-month increase of 12.35% and a year-on-year increase of 12.37%, setting a new high for the year. From January to June, the cumulative export volume of candles totaled 161,800 tons, reflecting a year-on-year growth of 8.86%. This month, our paraffin was exported to 166 countries and regions. The demand for candles in the UK ranked first this month, totaling 4,916 tons, with a month-on-month increase of 42.33%, while the Netherlands ranked second with a demand of 3,115 tons, showing a year-on-year increase of 17.66%. The export of candle resources to European regions saw an upward trend this month. It is anticipated that the candle export volume in July will be around 32,000 to 35,000 tons.

【 Paraffin Replacement Products 】
1. The substitute for tea products is stearic acid, and this month, the price of domestically produced primary stearic acid has experienced fluctuations and risen. The raw material palm oil market has also seen upward fluctuations this month, notably influenced by import tariff news from Indonesia at the beginning of the month, which significantly boosted the cost side of the stearic acid market. This led to increased demand as downstream buyers entered the market due to the price rise. Although the raw material palm oil market retracted some premiums afterward, the pressure on inventories at production sites remains low, and the intention to maintain prices is strong. Consequently, there is support for the cost side of the stearic acid market, and industry expectations for the future have strengthened continuously. Following slight adjustments in market negotiations, stearic acid sellers have once again raised prices.

2. Trends in the substitute product, Fischer-Tropsch wax:
This month, the price of domestic Fischer-Tropsch wax has been flexibly adjusted upward, currently rising by $42 to $50 per ton compared to last month, which has boosted market trading atmosphere. Throughout this month, the upward trend in related paraffin prices has continued, alleviating the sales pressure on Fischer-Tropsch wax, thereby providing support for Fischer-Tropsch wax prices. Currently, the supply from manufacturers remains stable.

【 Future Outlook of Paraffin Market 】
The competition between supply and demand in the paraffin market is expected to persist from August to October 2024, with prices experiencing steady but slight increases. It is anticipated that the domestic listing prices from the paraffin refineries will continue their trend of modest gains in August. While there is little indication of a significant boost in domestic demand, the low inventory levels at refineries, combined with a decline in shipping costs for the export market, may stimulate market transactions. From September to October, the paraffin market prices are likely to rise steadily. Although there is currently no substantial uplift in domestic demand, the onset of the traditional peak season for export markets is expected to increase export volumes, which will help alleviate the supply-demand imbalance in the domestic paraffin market and provide support for paraffin prices.