COMMODITIES QUARTERLY

30 April 2001 00:00  [Source: ICB Americas]

ACETONE--The contract price for acetone sold into the methyl methacrylate market settled at 19 cents per pound for the first quarter, down 1.75 cents. That settlement, plus slowing demand, is putting pressure on pricing in other acetone markets.

BENZENE--The spot and contract prices for benzene have fallen sharply in recent months after contract pricing peaked at $1.40 per gallon in February. Spot pricing is $1.15 to $1.20, but producers say that range is high because of energy concerns. There is weak demand for benzene's main derivatives: styrene, cumene, phenol and polycarbonate. TOLUENE/ XYLENES--Pricing for toluene and xylenes has come up steadily in recent weeks. Concerns about a tight gasoline pool are driving the market, and the Conoco outage in the UK has added further fears. In the US, toluene has reached $1.27 per gallon, and xylenes are $1.24. In Europe, standard nitration-grade toluene is around $410 per metric ton, and high-purity TDI-grade is at about a $10 premium. Xylenes have been moving up $5 per week for the past month and are $380 to $390 per metric ton.

ETHYLENE--Spot and contract ethylene prices are coming down as natural gas costs ease, and April material is 26 cents to 28 cents per pound. Producers remain wary of overcapacity later in the year, but a summer run-up in natural gas costs could keep ethylene's floor price fairly high.

ETHYLENE GLYCOL--The Asian contract price for fiber-grade glycol fell to $500 per metric ton for May, down from $525 in April and $550 in March. Contract pricing for fiber-grade glycol in Europe and the US is largely tied to the Asian price, so global prices are softening. Virtually no antifreeze-grade glycol is being sold, although spot pricing is rated around 22 cents to 26 cents per pound. Production in the US and Canada is at minimum levels as buyers and sellers wait for the market to reach its bottom and demand to rebound.

FEEDSTOCKS--Natural gas pricing may hold the key to both the short- and long-term health of the US petrochemical industry. Gas remains around $5.25 to $5.50 per million BTUs, down substantially from its high of $9 to $10 last winter, but still around twice its traditional value. Some analysts expect gas prices to continue falling, but others warn that a surge in electricity demand next summer could send gas back up around $7. At current natural gas prices, ethane is 40 cents to 45 cents per gallon, propane is around 55 cents, and n-butane is 61 cents to 62 cents.

METHANOL--The methanol market is expected to remain strong over the next few months, although domestic producers face long-term troubles because of the high cost of natural gas. Contract pricing for methanol is 77 cents to 90 cents per gallon in the US Gulf, and the spot price is above 70 cents. But with natural gas at $5.50 per million BTUs, the floor price for methanol is around 65 cents per gallon, and imported material is expected to garner an ever larger share of the US market.

MTBE--Methyl tertiary-butyl ether (MTBE) demand is very strong because of a tight gasoline market and fears of a rough summer driving season. MTBE is around $1.50 per gallon and is projected to remain above $1.40. MTBE faces long-term difficulties, however, because of legislative attacks against it and its likely phaseout in California and other states.

PROPYLENE--Contracts for February and March settled down half a cent in each month. Contract prices are currently 22 cents per pound for polymer-grade material and 20.5 cents for chemical grade. Weak demand for polypropylene and acrylonitrile is putting downward pressure on the market. Spot prices are around 17.75 cents per pound for polymer-grade propylene and 15 cents for chemical grade.

STYRENE--Strong supplies and lackluster demand have forced styrene pricing down around to 23 cents to 24 cents per pound. Producers and analysts warned that styrene would face a rough first half when spot styrene pricing fell to 28 cents to 29 cents in February. Pricing may be at or near its bottom, but producers still complain of weak demand. Chinese buying and domestic polystyrene consumption both need to increase to improve demand.

PET--Sales of polyethylene terephthalate (PET) were up in the first quarter, but producers cautioned that might have been due to pre-buying in advance of a 7-cent-per-pound increase scheduled to go into effect April 1. Producers are also concerned about a slide in demand growth due to a lack of new high-volume applications. Pricing for bottle grade PET is at 60 cents per pound.

POLYETHYLENE--Producers have realized roughly 8 cents worth of price increases so far this year; however, the ability to achieve a remaining 3-cent increase is uncertain as declining ethylene prices and stagnant PE demand give buyers ammunition to refuse future price increases. Further impacting pricing are the capacity additions by Formosa and Nova.

POLYPROPYLENE--Prices have stalled at 37 cents for polypropylene as overcapacity wracks the industry. Global polypropylene capacity is projected at 3 billion pounds in excess of production. This surplus is not expected to narrow until at least 2005.

POLYSTYRENE--Demand for PS has slackened as convertors work off inventories and the economic slowdown reflects an easing of demand for certain polystyrene products. Producers launched a 3-cent-per-pound increase for March 1; however, buyers balked, citing a long styrene market and less than stellar polystyrene demand. Polystyrene is currently at 52 cents per pound.

POLYVINYL CHLORIDE--High energy costs, combined with an overall economic slowdown, crippled the PVC market in the fourth quarter of 2000 and into this year. The industry is poised for a rebound, according to some producers, as low inventories from pipe makers all the way back to resin producers need replenishing. PVC pricing currently hovers around 36 cents per pound.

TITANIUM DIOXIDE--Demand for TiO2 in the US has fallen off due to the economic slowdown. Europe and Asia have fared better, but producers are still somewhat wary when it comes to those regions. Pricing for TiO2 has stalled at roughly $1 to $1.09 per pound in the US, still below the reinvestment level of $2,300 per ton needed to justify new capacity.

AMMONIA--Ammonia prices continue to respond to high natural gas costs, and pricing in the US Gulf NOLA (New Orleans, Louisiana) are currently in the range of $196 to $200 per short ton, while pricing in Tampa ranges from $158 to $162 per short ton. Some industry observers say plant closings may occur in the next few months in response to higher energy costs. Poor weather conditions in the Western Cornbelt and Northern Plains have decreased demand, placing added pressure on ammonia producers.

CHLORALKALI--Caustic soda spot prices have moved steadily upwards from the $250-to-$270 range last November to their current $300-to-$325 range. There are indications that caustic pricing has peaked for the near-term. Chlorine began the year in a relatively weak demand position, the result of a sluggish US economy and rising energy costs. Spot chlorine prices continue to be around $30 to $50 per short ton. Still facing high energy costs, producers seem reluctant to sell below these values. The large number of planned outages in chloralkali may keep chlorine prices more balanced early in the second quarter.

DAP--Current domestic diammonium phosphate (DAP) pricing slipped slightly over $156 per metric ton last November and is currently in the $149-to-$152 range. Downward pricing is due to increased capacity, particularly in overseas markets.

SODA ASH--An oversupply of soda ash in most global markets has led to weak pricing. Domestic pricing has crept up from the $68-to-$73 range in February to a current range of $120 to $150. FMC is the latest producer to mothball capacity. It will idle almost 5 million short tons at its Granger, Wyo., facility in May. American Soda brought on 1 million short tons of product during the first quarter.

ACETYLSALICYLIC ACID--Prices remain stable, yet below traditional levels. The market has not yet felt the benefits of the International Trade Commission's vote to apply dumping charges against China. Rhodia, the global leader in acetylsalicylic acid production, remains hopeful that the ITC action will level the playing field in a competitive market.

One producer's list price for aspirin, USP, crystal, powder in 250-pound drums, by carload, f.o.b., is $3.70 per pound. The price for 90 percent aspiring granulation with starch, in 250-pound drums, c.l., f.o.b., is $3.90 per pound.

CST--Crude sulfate turpentine (CST) prices have remained at 50 cents per gallon throughout the first two quarters of 2001. Prices have held steady despite a paper industry slowdown, the weakening overall economy and a shortage of the material.

GLYCERINE--Glycerine prices face downward pricing pressure as the market faces lower demand growth and abundant supply. Prices have fallen roughly 10 percent in the second quarter following a decline that started last year. Natural glycerine prices are between 51 cents and 71 cents per pound, and synthetic glycerine prices are between $1.10 to $1.20 per pound. However, the premium synthetic glycerine price is increasing with the growing price difference between tallow-grade and synthetic-grade product.

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