Price rises stalling in balanced marketplace

28 July 1997 00:00  [Source: ICB]

Weaker polymer markets and softer export demand are offsetting the impact of cracker outages, but styrene and aromatics markets continue firm.

US ethylene spot prices have shrugged off Shell's major cracker fire at Deer Park and the closure of Dow's 320 000 tonne/year ethylene unit at Freeport, Texas. Spot prices have firmed by 1-2 cent/lb to 20-21 cent/lb and the June contract was not renegotiated with contract business done at 25-26 cent/lb. Producers warn that some of the pipeline systems involved are stretched, but US ethylene production is coping with the Shell outage and the two-month planned downtime and expansion at Chevron's Port Arthur, Texas, cracker by running down inventory. Contract nominations for July are for a 0.5-1 cent/lb hike, but producers admit that getting even a 0.5 cent/lb increase could prove difficult as a result of the stalled PE price hikes and low cash costs. Naphtha and ethane values suggest cash costs as low as 6 cent/lb and 10 cent/lb respectively, so it is little wonder that converters are fighting proposed PE price hikes. Shell is believed to have restarted the small cracker at Deer Park.

Propylene contracts are agreed for July at yet another roll-over, with polymer grade still priced at 21.25 cent/lb and chemical grade 19.75 cent/lb. Polymer grade spot prices have softened slightly in the weaker PP market and the absence of export demand from Asia and Europe where prices are too low to justify US exports. Spot prices are talked around 20-20.5 cent/lb and chemical grade spot prices are talked close to contract around 19 cent/lb. Producers are looking for a 0.5 cent/lb increase for August. US PP prices are under pressure from the start-up of the latest capacity Exxon's 240 000 tonne/year plant at Bayport, Texas. Low Asian PP prices, moving down towards $700/tonne CFR Southeast Asia, are also putting pressure on US prices of around $795/tonne for homopolymer grades.

Butadiene July contract prices rose 2 cent/lb for July to 22 cent/lb and in a tight market a further 2 cent/lb is nominated for August by two major producers. Spot prices are in the 23-24 cent/lb range and inventories are said to be at rock bottom at about 47 000 tonne. Butadiene and crude C4 imports have been a feature of the market following the Shell Deer Park outage with the US mopping up all available material in Europe and Asia. Shell's butadiene extraction unit restarted on 21 July operating for the forseeable future on purchased C4s, but sources suggest customers will remain on allocation in August. July allocations are 50%. Huntsman, Occidental and Exxon are also believed to be unable to supply full customer requirements. Occidental could bring forward two weeks' planned maintenance at Chocolate Bayou into August.

Benzene prices are recovering from the oversupply that hit prices late June, although material is still a little loose. Koch's cumene unit and Huntsman's styrerie unit are back up consuming product. Contracts fell from 85 cent/gal in June to 80 cent/gal in July, and suppliers have so far nominated 90 cent/gal for August contracts, but with spot numbers now at 85-87 cent/gal sources suggest that a lower nomination is possible. Inventories have dropped to normal levels as demand recovers.

Nitration grade toluene prices continue to move upwards with prices at 88-90 cent/gal and inventory falling as MSTDP and MTPX units continue to run at high levels. TDI contracts rose to 95 cent/gal for July in response to good buying interest. Spot prices are 94-95 cent/gal fob US Gulf.

Xylenes are holding at 91-93 cent/gal for spot material, with good buying interest at home and overseas. Strong exports to the Far East are reported, as well as exports to NWE from North America. July contracts rolled over at 90 cent/gal from June. Players expect a rollover or small price increase in August.

Paraxylene remains tight on the back of Exxon's force majeure declaration at Baytown (ECN 14 July 1997, p11), with customers restricted to 30% of normal contract volumes for July and no indication of August allocations as ECN went to press. Spot material is virtually unavailable. Spot prices are talked around 27-28 cent/lb, but no material has been traded since a 26cent/lb deal some weeks ago. PX had been tight since Exxon's problems began in late May, and supply is now worsened by the force majeure. MSTDP units are operating flat out to feed PX demand. Chevron's refinery at Houston, Texas, was brought down on 18 July due to a small hurricane, although it was expected to restart within a few days without affecting the market.

Orthoxylene demand from phthalic anhy-dride producers is good. The market is described as a little tight with the loss of the Exxon material from Baytown and Lyondell bringing forward its turnaround scheduled for August, to June to coincide with refinery operations. June contracts were finally agreed at 19.25 cent/lb, 0.25 cent/lb below nominations. Producers are looking for 20 cent/lb in July and 20.5 cent/lb for August. Some imported NWE material is reported arriving at 19.70 cent/lb CFR US Gulf, equivalent to $434/tonne. Domestic spot material is at 19.75-20 cent/lb fob US Gulf.

Styrene transaction prices rolled over from May into June at 25-28 cent/lb with posted prices at 29-30 cent/lb. Producers are still attempting a 2 cent/lb increase in July, although expect to get less after meeting resistance from buyers. Suppliers have also announced a 1 cent/lb rise next month, aiming for a 3 cent/lb increase from June to August. Producers say the US market is still tight because of planned and unplanned outages. Arco took its Channelview POSM1 unit down for five days on 19 July with the loss of 9074 tonne of production. Sterling has delayed planned maintenance until the first quarter of 1998. Spot numbers have firmed with a sale to South America at 24.5cent/lb fob US Gulf.

US prices
	Contract price	Nomination	Spot price
Ethylene	25-26 cent/lb (June)	+0.5 cent/lb (July)	20-21 cent/lb fob USG
Propylene (p)                  (c)	21.25 cent/lb (July) 19.75 cent/lb (July)	+0.5 cent/lb (Aug) +0.5 cent/lb (Aug)	20-20.5 cent/lb fob USG 19 cent/lb
Butadiene	22 cent/lb (July)	+2 cent/lb (Aug)	23-24 cent/lb
Benzene	80 cent/gal (July)	+10 cent/gal (Aug)	85-87 cent/gal fob USG
Toluene	95 cent/gal (a) (July)	na	88-90 cent/gal fob USG(n)
Xylene	90 cent/gal (July)	na	91-93 cent/gal fob USG
Paraxylene	22.5 cent/lb (Q3)	na	$595-617/tonne (nom)
Orthoxylene	19.25 cent/lb (June)	+0.75 cent/lb (July)	$430-440/tonne fob USG
Styrene	29-30 cent/lb (June)	+2 cent/lb (July)	24-24.5 cent/lb fob USG
Propylene (p) = polymer grade; (c) = commercial grade; toluene (n) = nitration grade; (a) = TDI grade. Contract price: ethylene/propylene/butadiene delivered pipeline connection; benzene, orthoxylene, fob US Gulf; styrene ex-works PX FD *posted price. 1 elimination of TVA

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