Aromatics ’06: Upstream factors drive world market

29 June 2006 02:55  [Source: ICIS news]

SINGAPORE (ICIS news)--Upstream factors such as crude, gas and gasoline are increasingly driving aromatics markets, an industry official said on Thursday.

High energy costs were being pushed through into high aromatics prices and retarding demand, said Phil Parker, deputy managing director of Petrochemical Corp of Singapore (PCS).

Citing US government forecasts, Parker said at the 2nd Asian Aromatics & Derivatives Conference that crude prices were likely to stay high while gas prices would be more volatile over the next two years.

The world of feedstock supply was changing rapidly and major increases expected in the availability of gas in the coming years, he added.

LPG supply would grow at around 60% between 2005 and 2010, condensate in the Middle East will be boosted by the giant Iran/Qatar field, while gas-to-liquids (GTL) will provide a new source for clean diesel fuel of over the next 10 years and result in naphtha with reduced pygas content.

However, volatility had increased in oil and gas pricing and made aromatics prices more unpredictable, he said.

The reformulation of transport fuels and new legislation had reduced the demand for methyl tertiary butyl ether (MTBE) and boosted alternative gasoline components such as toluene and xylenes. Gasoline demand continued to grow in the US and Asia despite price increases, although European consumption was falling due to dieselisation.

The consequent rise in toluene prices, with Asian numbers at the same level as benzene in the mid-$900s/tonne FOB Korea level, was likely to spell the end of hydro-dealkylation (HDA) production of benzene.

There were opportunities for profit differentiation in the aromatics sector by taking lower value feeds and using new process technology, said Parker.

Businesses that are active in the aromatics space could benefit from higher liquidity in trading markets, where volumes have increased due to the higher volatility, and paper swaps were gaining in popularity.

The past two years had more frequent arbitrage from Asia to the US, although freight rates had doubled over the same period and trading houses have had difficulty managing the risks inherent in greater volatility, he added.

There were also new growth opportunities in the gasoline markets for companies like PCS, which can leverage their blend know-how and benefit from the logistical advantage their Singapore base offered, he said.

The growth of demand into China could not be under-estimated, with global growth in the whole polyester chain including paraxylene (PX) now totally dependent on China. The expansion of oil markets and especially gasoline would also affect regional aromatics markets, he added.

However, the disconnect between high upstream and stable downstream pricing could result in weak markets for intermediate chemicals such as styrene and phenol.

The conference, which is organised by ICIS and International E-Chem, started on Thursday and ends on Friday.

By: Barbara Ortner
+44 20 8652 3214

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