18 May 1998 00:00 [Source: ICB Americas]By Janet Link
US ethylene glycol producers, entering the antifreeze season with trim inventories, expect strong sales and prices in the coming months.
Union Carbide Corporation raised its price for antifreeze-grade ethylene glycol early last week by 2 cents per pound to 22 cents, effective June 1. Dow Chemical Company has also nominated a 2-cent increase in off-list pricing, effective June 1. Other producers are expected to follow.
The June price of 22 cents per pound is based on a published price of 20 cents per pound for antifreeze-grade MEG in April. May pricing is still not fully resolved, but analysts expect it to be the same as April pricing.
Inventories of both ethylene glycol and antifreeze are low, according to market participants. "Antifreeze stocks are very low everywhere in the US: at the retail, distribution and blender levels," an analyst notes.
Antifreeze producers report good demand, which some attribute to low stocks at the end of 1997. "From January through April, antifreeze demand from wholesale customers has been above my expectations, and this is a reflection of low stocks," a producer says.
He estimates that ethylene glycol stocks in North America are 570 million pounds, roughly half what they were in May 1996. "We're going into the antifreeze season with the lowest stocks we've had in years," notes a producer. Another says he has had to turn down customer inquiries for extra volumes of antifreeze ethylene glycol.
Steady MEG exports are also keeping inventories trim. In 1997, the US exported an average of 72,000 metric tons per month of ethylene glycol. In January and February 1998, the figures were 65,000 metric tons and 74,000 metric tons respectively.
Adding to the market's optimism is the apparent strength of glycol business in Asia. "The Asian market has come back stronger since January," says a producer, who emphasizes the significance of this for the world market.
Analysts point out that steadily declining prices for ethylene glycol in the second half of 1997 reduced sales and led to substantial inventory drawdowns last year. Figures from the Chemical Specialties Manufacturers Association, which the industry points to as an indicator of trends but not as a complete record, show a drop in antifreeze sales last year.
According to the survey by CSMA's industrial and automotive specialty chemicals division, US sales of ethylene glycol-based antifreeze were slightly more than 172.2 million gallons in 1997, down from 190.3 million gallons in 1996.
The survey shows that 93.3 million gallons of packaged ethylene glycol antifreeze were sold in 1997, down from 103.3 million gallons the previous year. A breakdown shows sales of 234,567 quart-sized packages, 83 million gallon-sized packages and 10 million drum-sized packages. The gallon- and drum-sized categories saw roughly a 10 percent decline from 1996.
Bulk ethylene glycol antifreeze (or ethylene glycol for antifreeze) sales to packagers were 54.8 million gallons, down from 68 million gallons the previous year. Bulk ethylene glycol antifreeze sales to motor vehicle manufacturers for driveway or factory fill use were 23.9 million gallons, up from 18.9 million gallons in 1996.
Regarding plant operations, Union Carbide is delaying a turnaround at its Seadrift, Tex., ethylene glycol plant from June until September. It will come after the anticipated surge in demand during the next few months.
BUTADIENE--Some May butadiene contract business settled at 17c. per pound, a rollover from March and April. February pricing was 18c. per pound.
May 1 inventories were not confirmed, but producers expect them to be lower than April 1 figures. Because of plant turnarounds, manufacturers estimate that Europe will lose 70 million to 80 million pounds of butadiene production from March through early June.
Similarly, plant turnarounds are expected to cost the US about 70 million pounds of butadiene production in the June-July timeframe. Butadiene imports remain much lower than they were at the start of 1998. Preliminary estimates for May are around 29,000 metric tons.
Steam cracker operators continue to emphasize heavier feedstocks, but one market participant points out that any increase in butadiene output that results will be more than offset by the decrease in butadiene imports into the US.
BTX--Spot benzene prices declined slightly early last week from levels reported a week earlier. The softer tone of the market is still attributed to the impending arrival of at least 100,000 metric tons of imports from Asia and Brazil between early June and mid-July.
Traders note that plant downtime for styrene, cumene and ethyl benzene may be reducing benzene consumption and weakening its spot price. Early last week, spot benzene was trading at 74c. per gallon for June barrels, down from 77c. to 78c. per gallon at the start of the previous week.
Spot toluene was around 68.5c. to 69.5c. per gallon early last week for nitration grade, down 1c. to 2c. from a week earlier. June xylenes barrels were offered at 69c. per gallon early last week, with business done at 68c. per gallon.
MTBE--Spot MTBE prices early last week on the US Gulf Coast hovered around levels reported in recent weeks. Producers and traders rate May barrels at 67.75c. to 68.5c. per gallon, with June prices 0.5c. to 1c. higher. In New York Harbor, spot MTBE was 72c. per gallon.
Spot MTBE's calculated blend value in conventional gasoline is 68c. to 68.5c. per gallon, close to the blendstock's spot price. Most sources consider the market stable. "I don't see fundamentals changing much in this market until perhaps after Memorial Day, the official start of the driving season," a producer says.
Domestic gasoline demand has been strong in recent months and often increases during the summer driving months. The strong gasoline demand and an improvement in crude oil prices since the first quarter are reflected in MTBE prices. In mid-March, spot MTBE sold for as low as 54c. per gallon, according to traders.
Turnarounds are also helping the spot market. Huntsman's 15,500 b/d plant in Port Neches, Tex., which came down April 16, is scheduled to restart around the end of the first week in June. Texas Petrochemicals will take down one of its dehydrogenation units for at least two weeks in the second half of June. The unit's MTBE capacity is 10,000 barrels per day.
In Europe, Arco's plant at Fos, France, is down for turnaround.
ORTHOXYLENE--May orthoxylene contracts are still not fully settled. At least one producer has nominated an increase of 1c. per pound, to a price of 15c. per pound.
PROPYLENE--Several sources report that May contract prices for chemical- and polymer-grade propylene have settled and are down 0.5c. per pound, but not all business is confirmed as settled. The price decrease would drop polymer-grade to 14.25c. per pound and chemical-grade to 12.75c.
Producers and buyers cite weak spot pricing as the major factor crimping contract prices in May. One market participant pegs spot polymer-grade business as low as 10.5c. per pound. Another source, however, doubts that any significant volume is being sold at that level and rates the spot market higher.
"Significant volumes were previously sold at 11c. per pound," he says, adding that he would be unwilling to sell at that level now. Spot chemical-grade propylene is about 0.5c. per pound less than polymer-grade.
Propylene's value in gasoline alkylate improved in April and May. After falling to around 6c. in March, it is now closer to 10c., nearly 1c. above the spot price for refinery-grade propylene. As a result, less refinery-grade material is coming into the chemical market.
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