Market and product

China is the dominant wax producer, accounting for about 70% of global wax production or equivalent to 1.5m tonnes/year, according to market participants.

Wax prices were assessed at $1,560-1,630/tonne (€1,076-1,124/tonne) FOB (free on board) China in early May, according to ICIS.

The traditional off-peak demand season in July and early August and high inventories in China have resulted in lower sales at current prices and lower offers, the producer said.

Speculative trading in China has decreased despite stable demand from end-users, causing overall demand to weaken, traders said.

In addition, the Chinese government is heard to be clamping down on illegal exports of solid wax that are packaged as candles without wicks as candle producers receive tax refunds on their exports from China, market observers said.

However, this could not be confirmed with the authorities.

Market sources said the new tightening measures may be causing the low trading activity, resulting in the weak demand in China’s export market.

A wax producer in China is planning to lower its prices for July from its offers at $1,600/tonne FOB China in June because of falling crude prices and less trading activity speculation.

Another Chinese producer was heard to be decreasing its domestic prices by yuan (CNY) 400/tonne ($62/tonne) because demand is poor. Other Chinese producers are expected to follow suit as the lower prices will cause the market to weaken further, observers said.

“The high temperature in the summer season [from June to September] may cause wax with lower melting points to melt, hence producers will be keen to lower their prices of waxes [with low melting points],” a trader said in Mandarin.

“However, prices may recover with demand in late August,” a producer added.

The demand for wax is expected to increase in late August as it is the traditional peak manufacturing season for candles for the year-end festivities in the US and Europe.

Offers for palm wax were heard to be lower than $1,300/tonne CFR (cost & freight) southeast (SE) Asia.

However, palm wax is only a partial substitute for paraffin wax because it burns faster, a market participant said.

The major producers of paraffin wax in China include PetroChina and Sinopec.

PetroChina’s inventories are “normal” at around 10,000 tonnes, while Sinopec’s wax inventories are high, traders in China said.

However, sources from PetroChina could not be reached for comment, while Sinopec’s sources could not confirm the company’s inventory levels.