China aromatics to firm on downstream demand

04 May 2007 04:58  [Source: ICIS news]

By Mahua Mitra

SINGAPORE (ICIS news)--Key  Asian  aromatics markets  are expected to  firm after the  week-long  Labour  Day  holidays ending Monday due to downstream demand, except toluene which may be stable,  traders and suppliers  said  on Friday.

Domestic prices of benzene in Asia are expected to trend up, in tandem with improved demand in the downstream styrene monomer (SM) industry.

China domestic benzene prices have been plagued by poor demand and a supply glut in recent weeks, putting pressure on suppliers to cap their benzene offers. Spot offers were last heard at yuan (CNY) 9,550-9,600/tonne ($1,242-1,248) ex-tank last week. Some traders believe that a strong performance in the FOB (free on board) Korea market could check further losses in the domestic market.

“Crude and gasoline prices should begin to firm towards the US driving season. This will have a bullish effect on aromatics values globally,” a trader added.

In the SM market, prices are expected to remain firm from next week as buoyant energy and benzene numbers would sustain prices of the monomer, traders said.

A recovery in downstream styrenic plastics demand would boost consumption of SM as well, they said.

“Styrenics  demand typically spikes during the manufacturing season in China, between May and September, increasing market appetite for SM,” a producer said.

Typically, demand for polystyrene (PS), expandable polystyrene (EPS) and acrylonitrile-butadiene-styrene (ABS) resins would increase from late May when the Chinese market enters the traditional manufacturing season.

The peak season usually lasts until October.

Firm demand from solvent end-users in China and tight supply from Korea is expected to keep mixed xylene prices on a firm track after the holidays, said traders and producers.

Solvent grade xylene selling ideas this week were above $900/tonne FOB Korea level, up more than $100/tonne from the level assessed a month earlier. Tight supply in May and June from Korean producers for this grade is a driving force to this uptrend, said market participants.

“Two of the major producers in Korea would be having turnarounds in May and June, which is affecting the supply level from Korea. These days, traders are aggressively trying to gather June cargoes,” said a key producer of solvent grade xylene.

Bullish isomer grade prices in Asia was another factor pushing solvent grade prices higher, said traders and suppliers.

Isomer grade prices have jumped around $150/tonne in the past two weeks to $1,100-1,115/tonne FOB Korea, on the back of a strong paraxylene (PX) market and tight supply in Asia.

But toluene was likely to remain stable in the key Chinese markets, said traders, adding that this was softer than the firm trend seen in the FOB Korea and the US market.

Traders and suppliers were hopeful that demand would improve from the downstream buyers in China after the holidays.

Before the start of holidays, sellers in eastern China were heard trying to hike prices, but downstream buyers resisted the higher offers as they had comfortable stock levels.  

Toluene prices in the eastern China markets fell heavily in March this year due to very high inventory levels and weak downstream buying.

Despite this bearish influence, FOB Korea prices improved in April on firm US toluene values. But this resulted in a gap between FOB Korea and CFR (cost and freight) China prices, as demand for imported material remained soft in line with the poor domestic market scenario.

“It would take a month or two for the inventories to come down in China,” a trader said.

Traditionally, toluene prices are known to run up ahead of the summer driving season when gasoline demand spikes in the US. It is used as an octane booster for gasoline blending in the US, which is known to tighten supplies from US to Asia.

($1=CNY7.71)

Clive Ong and Chuan Ong contributed to this article.

By: Mahua Chakravarty
+65 6780 4359

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