Olefins tumble in run up to Thanksgiving

24 November 1997 00:00  [Source: ICB]

The startup of new plants by Exxon and Westlake, coupled with new capacity at Chevron, has seen olefins prices come under pressure.

Ethylene numbers are under pressure from weak domestic and export derivative pricing and increased supply. Sellers agreed to two consecutive decreases of 0.5 cent/lb in October and November contracts. The two-month settlement follows the startup of the new Westlake and Exxon plants, coupled with new capacity from Chevron, although commercial quantities from Westlake and Exxon have still to hit the market. Downward pressure has also come from weak spot ethylene prices relative to contract over past months. November spot prices are steady at around 20 cent/lb. In contrast, figures reported by NPRA show a 355 000 tonne drop in US inventories in Q3 compared with the previous quarter, although it is felt inventories are beginning to rise. Dow, which has experienced problems at its 680 000 tonne/year Freeport 8 plant since 29 October, was expected to have onspec production again on 19 November. Amoco has had its 635 000 tonne/year Chocolate Bayou No1 plant down since 10 November but is expected to restart the plant at the end of the month (ECN 24 November p10).

Propylene prices remain under pressure. Contract polymer and chemical grade prices fell 1 cent/lb in October and 0.75 cent/lb in November and prices could fall a further 1-1.5 cent/lb in December. Spot polymer prices are quoted at 16.75 cent/lb, well below the November contract number of 18.75 cent/lb. Weak derivative pricing and monomer oversupply are blamed. Alkylation values of 7.5 cent/lb mean that the incentive for refiners to bring propylene to the market at fairly low prices is high with refinery grade propylene prices at 13.5 cent/lb. Players acknowledge a build in inventories but say this is partly to cover turnarounds planned for quarter one. NPRA figures show propylene inventories rose 118 000 tonne in Q3 over the previous quarter. Chemical grade balances are seen as tighter than polymer grade and one source indicated some producers are selling polymer grade for chemical grade to restore balance.

Butadiene contract prices fell 1 cent/lb in November to 21 cent/lb. With no nominations for December, the expectation is that prices will roll over in December. Crude C4 prices are also softening in response to the lower contract settlement and improved domestic supply. Exxon had a two-week unscheduled shutdown in the first half of the month at its finished butadiene plant, releasing extra crude C4 into the market. Crude C4 prices are quoted at around $270/tonne cif. The Texas Petrochemical three-week shutdown at Houston originally planned for October was postponed until 28 November.

Benzene spot market prices have risen to $1.09/gal as supply tightens. A 50 000-70 000 tonne shipment to NWE in October was enabled largely by producer time swaps. Now producers report difficulty repaying borrowed volumes. High production rates in derivatives are keeping demand strong and the marketplace snug. Contracts settled for November at $1.00/gal. Nominations for December are 5-10 cent/gal and $1.05/gal is expected.

TDI grade toluene demand has fallen away slightly but nitration grade demand is strengthening, keeping markets balanced overall. TDI grade contracts fell 0.5-1 cent/gal to 85 cent/gal for November, but demand has since risen as HDA units have come on. No December nominations have been made. Weak paraxylene markets have led to reduced MSTDP unit operating rates, now estimated around 85%. Nitration grade spot toluene is priced around 74-75 cent/gal fob US Gulf.

Xylene numbers have fallen on the back of lower gasoline prices, and a drop in Korean and domestic buying interest. Contracts for November settled down 9 cent/gal at 73 cent/gal with no December nominations as ECN went to press. Exports to Europe continue but volumes, estimated at 10 000-20 000 tonne/month, are not enough to affect the US market. Spot numbers are below contract at 70 cent/gal fob US Gulf. No recovery is forecast for December, as market fundamentals seem irreversible, say players.

Paraxylene markets are oversupplied, and numbers continue to decline. PTA and polyester prices have softened, say producers, and PX markets have slumped as a result. PX spot numbers are around Rotterdam equivalent levels of 17-18 cent/lb, but these are nominal as no trading is taking place. Exxon's Baytown customers are no longer on allocation as of 1 November. Demand for early 1998 deliveries of raw material from Reliance's PTA plant in India may provide some respite for producers.

Orthoxylene contract numbers have fallen steadily since September. Levels fell from 19 cent/lb to 18.5 cent/lb for October and to 18 cent/lb for the first November settlements. No nominations have been made for December. Players describe the market as softening. Phthalic anhydride demand has fallen, but despite this OX production rates are expected to stay stable to support exports to Asian markets. Spot export continues at around 18 cent/lb fob US Gulf to Asia and Mexico.

Styrene contracts for October ranged from a roll-over to 0.5 cent/lb down from September posted figures of 30-31 cent/lb, with no November nominations. Transaction prices are around 27-28.5 cent/lb. Supply is sluggish following Arco's two-month outage at its PO/SM 2 unit at Channelview, Texas. Players predict roll-over pricing for November followed by a 1 cent/lb increase in December. Product availability is low and spot markets are thinly traded. Spot numbers are around 21.5 cent/lb fob US Gulf, unchanged since September.

US prices
	Contract price	Nomination	Spot price
Ethylene	24-25 cent/lb (Nov)	n.a.	20 cent/lb fob USG
Propylene (p)                    (c)	18.75 cent/lb (Nov) 17.25 cent/lb (Nov)	n.a. n.a.	16.75 cent/lb fob USG -
Butadiene	21 cent/lb (Nov)	n.a.	20 cent/lb (nom)
Benzene	$1.00/gal (Nov)	+5-10 cent/gal (Dec)	$1.07/gal fob USG
Toluene	85 cent/gal (a) (Nov)	n.a.	74-75 cent/gal fob USG(n)
Xylene	73 cent/gal (Nov)	na	70 cent/gal fob USG
Paraxylene	21.5 cent/lb (Q4)	n.a.	17-18 cent/lb fob USG(n)
Orthoxylene	18 cent/lb (Nov)	n.a.	18 cent/lb fob USG(n)
Styrene	29.5-31 cent/lb (Oct)	n.a.	21.5 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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