C2 and C3 face downward pressure

31 October 2005 00:01  [Source: ACN]

Weakening demand dampens sentiment for ethylene and propylene but methanol rides high on strong buying and snug supply. Ammonia is stable. MTBE continues to slide

Naphtha: Prices declined on Tuesday from a weak earlier on softening crude values. However, they went up again the next day when crude strengthened on the back of forecasts that the winter in North America this year would be more severe than last year.

The MoPJ slipped on Tuesday by US$7-8/tonne from a week earlier, to US$551-552/tonne cfr Japan for second-half December cargoes. However, it picked up steam on Wednesday to close at US$563-564/tonne cfr Japan, up US$4-5/tonne from the previous week.

Nymex crude futures for December eased on Tuesday by US$2.62/bbl from the previous week to US$60.22/bbl, as Hurricane Wilma missed key oil refining and gas facilities in the Gulf of Mexico. However, crude was at US$62.10/bbl the next day, only 70 cents down from the previous week.

Asian market fundamentals for naphtha were rather bearish. A major dampener was surplus supply – a contrast to the situation in earlier months. Then, the Asian market was tight, as most Middle-eastern cargoes were being diverted to the West.

Ethylene: Markets were extremely quiet. The overriding sentiment was downbeat, with Chinese buyers, especially those in the polyethylene segment, unwilling to come forward and build up stocks due to weak demand (see page 30).

Enhancing the downward pressure on prices was the restart of Chinese Petroleum Corp’s (CPC) No 5 cracker in Taiwan last week after a two-week maintenance shutdown. The cracker, CPC’s largest, can produce 550 000 tonne/year of ethylene. The restart of Lotte Daesan Petrochemical’s 650 000 tonne/year cracker in South Korea after a month-long turnaround, however, had negligible impact on the market, as its downstream units, which offtake feedstocks from the cracker, restarted earlier than scheduled.

There was a wide gap between offers and bids. Offers at US$980-990/tonne cfr SEA/NEA were being met with bids in the US$920-930/tonne cfr SEA/NEA.

Propylene: Sentiment softened a little, due to lacklustre demand from the polypropylene segment (see page 30) although demand from propylene oxide players was robust.

Supply was relatively tight in SEA. Offers of US$1100/tonne cfr SEA faced bids of US$1050/tonne cfr SEA. Yet no deal was reported.

In NEA, sentiment was weaker with the restart of CPC’s 270 000 tonne/year propylene unit. The last confirmed deal was at US$1020/tonne cfr China. Subsequent offers of US$1000/tonne cfr China faced bids of US$980/tonne cfr China. Intra-trader offers of US$970/tonne fob Korea received a lukewarm response.

Methanol: Strong demand and relatively snug supply caused prices to rise. In China, prices rose to US$235/tonne cfr China, up US$5-10/tonne from the previous week. In SEA, they rose by US$5/tonne to US$230/tonne cfr SEA. Offers of US$238/tonne cfr SEA failed to attract bids higher than US$225/tonne cfr SEA.

In India, prices rose by US$10/tonne, to US$235-245/tonne cfr India.

MTBE: Price ideas continued on a downward spiral due to softening gasoline values, declining European and US prices and weak demand. No deal was reported, and offers of US$660-670/tonne fob Singapore faced bids of US$640/tonne fob Singapore.

Ammonia: Markets were very quiet but sentiment appeared to be stable. Most Asian customers had stocked up through contract deals and were not looking for spot cargoes.

US demand continued to be robust, resulting in stable Yuzhnyy prices at US$305-310/tonne fob Yuzhnyy.

 

SURPLUS SUPPLY DRIVES DOWN BUTADIENE PRICES

Butadiene: Prices continued to decline in China due to excess supply and the reluctance of styrene butadiene rubber (SBR) players to overstock. A Chinese SBR producer bought a 1000-tonne Brazilian butadiene cargo for US$1160/tonne cfr China, and then a 2000-tonne cargo from Iran at US$1150/tonne cfr China. But it spurned subsequent offers by South Korean and Indian suppliers at US$1150/tonne cfr China, as its inventory level was quite high, and it was operating only at 80-90%.

BULK CHEMICAL PRICES, US$/tonne

	Asia-Pacific spot NE Asia1	S Asia and SE Asia2	US contracts US3	European contracts NWE4
Naphtha	563-564 cfr Japan	–	na	na
Ethylene	880 cfr NEA6	930-940 fob SEA6	1003 Sep	825 Q4
Propylene5	1020 cfr China6	10506	904 Sep	810 Q4
Butadiene	1150-1160 cfr China	11106	1124 Oct	815 Q4
Methanol	235 cfr China	230	300 Sep	220 Q4
MTBE	610 cfr China6	690-700 fob SEA6	na	na
Ammonia	290 cfr Taiwan6	3666	360 cfr 1H Oct	na

1 Prices are fob Korea unless otherwise indicated; 2 Prices are cfr SEA unless otherwise indicated; 3 US prices are contract le­vels in US$/tonne on an fob basis, courtesy of ECN, unless otherwise stated; 4 European free–delivered contract prices in Euro/tonne unless otherwise stated; 5 Polymer grade; 6 No recent confirmed deals; MoPJ = Mean of Platts Japan; na = not available

Prices contained in this report are obtained by the ACN team through consultation with producers, consumers and merchants in the regions indicated. They are a guide to price levels of recent business and reflect medium to large tonnage sales. Spot prices are quoted as indicated: cfr – cost and freight; fob – free on board; cif – cost, insurance and freight. Spot prices are based on information available mid-week prior to the date of issue. Dollar prices are based on prevailing rates of exchange.

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