Commodities Monthly

24 May 2004 00:01  [Source: ICB Americas]

BTX

Benzene has settled at a contract price of $2.28 per gallon for May, down from $2.35 for April. Spot pricing continues to fluctuate and is starting to rise on renewed fears of rising energy costs. When benzene contracts fell, analysts speculated that benzene pricing was over its peak and would start to lower. Although spot pricing was higher a month ago, in a range of $2.40 to $2.55, renewed strong spot pricing in a range of $2.30 to $2.40 indicates that benzene may not truly soften until energy costs ease. Toluene could get tight during the summer driving season, especially if oil and gasoline costs continue to rise. Last week, nitration-grade toluene climbed to $1.76 to $1.78 per gallon for May material and $1.79 for June, and commercial-grade reached $1.70 to $1.76. However, toluene’s gasoline blending value has surged to around $1.70, leaving refiners with little incentive to pull it out of gasoline. Xylenes are around $1.80 per gallon for spot isomer-grade material. The market’s largest buyer has settled at a contract price of $1.68. Another major buyer has settled at $1.72.

Butadiene

Firm demand and a tight supply situation prompted a 1c. increase in May butadiene contracts. The increase represents the first movement in butadiene contract pricing after 10 months at 29c. per pound.

Ethylene

Contracts rolled over in April at 31.5c. per pound, their fourth consecutive month at that level. Spot ethylene prices are 28 to 29.5c. per pound.

Ethylene Glycol

June contract nominations for Asia were rolled over from May at $860 and $880 per metric ton. In the spot market, business has cooled considerably according to sources, with little to no new business getting done. A handful of spot deals in the $860 to $870 range were completed. Observ-ers point to a softening downstream polyester market as the main culprit for weak spot demand.

Methanol

The Methanex Corp. nondiscounted US reference price for May remains at 75c. per gallon. However, spot pricing has risen to the 77c. per gallon range thanks to a tightening supply situa-tion and rumors of additional operating difficulties.

Orthoxylene

May contract prices appear poised to increase 1.5c., which would bring contracts to 30c. per pound.

Paraxylene

Paraxylene has settled its May contract price at 34.75c. per pound, a 1.25c. increase versus April. Spot pricing is 31 to 31.5c. per pound.

Propylene

Contracts rolled over in April at 30.75c. per pound for chemical-grade material and 32.25c. for polymer grade. For May contracts, at least one producer is seeking an increase of 0.5c. per pound while buyers are trying to get prices reduced.

Styrene

Styrene is under pressure as producers have announced price increases for May of 2 to 4c. per pound. Analysts speculate that prices may actually increases by half a cent to a penny. Spot pricing is in the upper 30s (c. per pound) to lower 40s. Contract pricing is in a range of 55.75 to 61c. per pound.

Polystyrene

Polystyrene continues to enjoy strong growth although the market remains under severe pressure from energy and raw material costs. Since last November, the price of benzene has risen by nearly $1 per gallon, driving all feedstocks for styrene up by more than 40 percent. Polystyrene producers responded by launching price increases of 4c. per pound for both January and February, followed by 3c. for March. All of those increases have been implemented, according to producers, and a further increase of 4c. for May is still being implemented. Benchmark pricing is roughly 55 to 58c. per pound for general-purpose polystyrene and 58 to 60c. for high-impact material.

Polypropylene

Polypropylene producers are standing by earlier projections of robust demand growth of 4 to 6 percent for 2004. Surging feedstock costs have prompted producers to announce price increases of 3c. per pound for January, 3c. for February, 5c. for March, and 4c. for April. Producers are guarded on saying how much of those increases have actually gone through. One producer says it has “been successful in implementing 10c. of the 15c. we’ve announced.” Another says it has “implemented an amount greater than our cost increases.” Benchmark pricing is 44 to 48c. per pound.

Polyvinyl Chloride

Polyvinyl chloride (PVC) is being strained by high energy and feedstock costs, and summer power outages could further strain the market by tightening chlorine supply. Analysts say that the explosion at Formosa Plastics Corp. USA’s plant in Illiopolis, Ill., on April 23, should have no effect on the suspension market for PVC and little, if any, impact on the dispersions market. However, the loss of the plant’s output should tighten up the copolymer market. Benchmark pricing for PVC is roughly 40 to 45c. per pound, and benchmark pricing for vinyl chloride monomer is 29 to 31c. per pound.

Polyurethane

Products remain under pressure from energy and feedstock costs, and pro-ducers are still pushing to raise prices. In response to protracted high benzene costs, BASF has announced a surcharge on all of its methylene diisocyanate (MDI) and polyol pro-ducts in North America. Dow Chemi-cal Company has announced a further price increase of 8c. per pound for Voranate toluene diisocyanate (TDI), effective June 1. The company says that recently announced price increases have not offset the effects of hydrocarbon and energy costs. Pricing for MDI and TDI varies widely according to volumes and contract terms. Benchmark pricing is roughly 70 to 85c. per pound for MDI and 90c. to $1.05 per pound for TDI.

Epoxy Resins

Epoxy resins and vinyl esters continue to move up in price. Producers have announced large price increases in Europe and North America over the past two months, aimed at rebuilding margins weakened by energy and feedstock costs.

Acrylic Emulsions

Acrylic emulsions are under pressure as producers attempt to raise prices, though end-market demand may not be strong enough to accept large price increases. A producer notes that energy and raw material costs for emulsions and upstream monomers have climbed nearly 90 percent since 2002, but price increases have recouped only 60 percent of those increases. Producers have announced a spate of price increases for April and May, but decline to comment on market prices.

Chloralkali

Chloralkali producers are seeing strong demand for chlorine, although caustic soda pricing appears to have bottomed. Producers implemented a $75-per-ton price increase for chlorine, effective April 1. One producer calls the increase “rock solid” and another says it “looks like it is 100 percent successful.” Demand for caustic soda has been less than scintillating, but its bottom appears within sight, and producers anticipate improved demand and pricing for the rest of the year. Chlorine is roughly $260 to $280 per short ton. Caustic soda is roughly $60 to $80 per short ton.

Caustic Potash

Caustic potash (potassium hydroxide) remains stable. Producers pro-ject moderate growth and expect pricing to track historical patterns, in line with changes in inflation and growth in GDP. Pricing ranges from $13.65 to $15.60 per cwt for liquid material, 45 percent basis, and $40 to $48 per cwt regular grade, flake, 88 to 92 percent material.

Calcium Chloride

The calcium chloride market is tight to balanced, following a strong winter season. At least one producer has announced a price increase for the dry form of the product. Pricing varies widely according to volume, grade and contract terms. Ballpark pricing is $200 to $350 per ton for most grades.

Coconut Oil

Prices of coconut oil have steadily climbed this year driven by continued slow shipments from the Philippines, decreased crude coconut oil stocks in Rotterdam, the Netherlands, and rising nearby demand in the oleochemicals sector. Supply from the Philippines is said to be tight because of copra shortage. Meanwhile, Rotterdam coconut oil stocks were recently reported at around 11,000 tons compared to a normal stock level of around 50,000 tons. Prices are expected to remain firm in the short- to mid-term, especially with currently strong soybean oil prices. East coast crude coconut oil prices are quoted in the mid-40c. per pound range while West coast price are in the mid-30c. per pound mark. In Rotterdam, crude coconut oil prices were placed at the mid- to high $700-per-metric ton range.

Energy

Prices remain high and continue to put pressure on the markets for petrochemicals and plastics. Oil has surged above $41 per barrel, and forecasters warn that it could get considerably higher—oil was around $70 per barrel in today’s dollars in 1979, following the Iranian revolution. However, current prices are an estimated $8 to $12 higher than supply-demand fundamentals warrant, and an easing of tensions in the Middle East could soften prices. In the longer term, the global oil infrastructure is being challenged by growing consumption in China as well as the US. Natural gas is around $6.40 per mmbtu, having risen by nearly 90c. since the middle of April. The US government expects natural gas pricing to remain “relatively high” for the rest of the year. “Wellhead prices are expected to average $5.41 per mmbtu through the end of the storage refill season [ending October 31] and $5.59 in November and December,” the Energy Information Administration says in its latest report. “Barring cooler-than-normal weather this summer, the likelihood appears small that spot prices will fall significantly below $5.65 per mmbtu for the rest of 2004.” Federal authorities have issued subpoenas to Duke Energy, El Paso, Center-Point Energy, and ONEOK in conjunction with an investigation into last fall’s run-up in natural gas prices, according to published reports. Natural gas costs surged nearly 50 percent in the fourth quarter of 2003.

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