Players prepare for contract talks

28 May 2007 00:00  [Source: ICB]

Energy costs continue to fluctuate and global markets are still quiet. Players ready themselves for contract discussions, and toluene cargoes head west as arbitrage opens

Naphtha cargoes are up at $687-691/tonne with June swaps at $686-687/tonne. Brent crude climbed to $71.05/bbl for July last Thursday, up from $68/bbl a week earlier.

On Tuesday, prices in Asia jumped to another all-time high of $740/tonne. By Thursday, the first-half July contract was at $728-731/tonne CFR Japan. Tight supply, caused by strong gasoline consumption, and anticipated demand from Formosa Petrochemical Corp's (FPC) new No 3 cracker start-up in Taiwan is boosting market sentiment.

Spot ethylene is in a $1,220-1,280/tonne range, pushed up by an imported deal late in the previous week. Production-wise, early June should see two crackers back up after planned maintenance. Meanwhile, the bi-monthly ethylene contract settlement is imminent, with an increase widely expected because of high naphtha prices.

Spot values in Asia are higher at $1,250-1,280/tonne CFR SE Asia, with the market propped up by urgent requirements from Thailand, and limited spot supplies. CFR NE Asia prices are firmer at $1,100-1,150/tonne.

Based on healthy buying interest, CIF propylene numbers are heard in an €890-920/tonne range. There is speculation that there may be price decreases in the US because of increased supply and weakening demand, which could trigger an arbitrage to Europe.

Asian prices are notionally lower at $1,080-1,110/tonne CFR NE Asia, reflecting lower-priced deals into China for June delivery. Traders are trying to rush sales before FPC's No 3 olefins unit starts up.

The butadiene (BD) spot range is unchanged at $1,260-1,290/tonne in Europe. A major buyer is set to start a turnaround in June, so a substantial lengthening of the butadiene market is anticipated. Asian spot prices continue to slide to $930-940/tonne CFR NE Asia amid bearish sentiment, with players taking a wait-and-see stance.

Benzene activity in Europe has become subdued. By Thursday, prices had dipped to $1,170-1,190/tonne, having peaked at $1,210-1,225/tonne earlier during the week. The 80,000 tonne/year hydro-dealkylation (HDA) unit in Immingham, UK, has stopped production for a week-long turnaround.

Spot prices in Asia are stable, with July cargoes at $1,135-1,155/tonne FOB Korea.

European toluene is reported in an $860-880/tonne range for June, with one deal heard at $870/tonne. The arbitrage window between Europe and the US has opened, with some 25,000-26,000 tonnes heading west. Asian prices are up slightly at $910-930/tonne. No deals have been concluded.

Mixed xylenes values are climbing because of firmer US numbers and high gasoline prices. No deals have been done. The range is now at $1,000-1,050/tonne.

A quiet isomer market sees Asian prices stable at $1,100-1,110/tonne. A deal was done at $1,100/tonne for June. Solvent grade is up on tight supply and strong demand at $950-960/tonne (see page 26).

European contract negotiations are yet to start for orthoxylene (OX) but some sellers are eyeing hikes of $30-50/tonne, blaming tight supply. Buyers, however, are looking for a rollover. Spot values are nominal at $1,180-1,220/tonne, up on reports of production issues in Germany, although these are now thought to have been resolved.

Asian OX is higher, at $1,210-1,230/tonne CFR NE Asia. No deals have been done. A June shipment cargo has been sold to India at $1,260/tonne CFR India.

Few deals have been reported in Europe's styrene market, with most of the shipment delays to Europe now covered. The range is $1,520-1,540/tonne, with June trades reported at $1,545 and $1,550/tonne.

Asian numbers gained further ground last week with deals concluded at $1,390-1,395/tonne FOB Korea for July shipment.

Offers for European methanol are heard at €175/tonne for May and June, with no bids. The market is devoid of buyers and demand is slow. The range is therefore nominal at €170-180/tonne.

Asian spot activity is limited and prices are stable at $230-260/tonne CFR Asia. Domestic prices in China are around CNY 2,150-2,400/tonne ($281-314, €209-233/tonne) ex-tank.

A single $855/tonne MTBE trade has been reported during another lacklustre week. MTBE bids and offers are in a wide $810-860/tonne range. The factor to gasoline is 1.10-1.11. Prices in Asia are up $5-10/tonne on the previous week at $810-820/tonne FOB Singapore because of strong demand, limited spot supply and high gasoline values. The higher European prices are also boosting Asian price ideas.

Yuzhny ammonia values are stable at $244-247/tonne in a quiet market with many players attending the International Fertilizer Industry Association (IFA) annual conference. Nevertheless, the focus is on negotiations for June prices, which are starting to get under way. In Asia, CFR Taiwan numbers are unchanged at $338-348/tonne levels.

The Markets Trends & Data pages feature prices compiled using information from our sister service ICIS pricing. Data for all Monitors are also based on information from ICIS pricing.

HUGE ASIAN PX NOMINATION COMES AS NO SURPRISE

A hefty $125-135/tonne hike nominated by Asian paraxylene (PX) producers for the June contract has been labelled too low by some European sellers.

The targets for the Asian contract price (ACP) were announced last week and were largely in line with expectations. Producers, as well as some consumers, agree that recent strong demand and firm spot prices in the Asian market mean that increases of this scale are not unrealistic.

However, some players suggest that current market fundamentals could demand an even higher contract price.

Major Asian PX producers Nippon Oil and Idemitsu Petrochemical both nominated their prices at $1,290/tonne CFR Asia, up from May's $1,165/tonne settlement. ExxonMobil meanwhile, posted its ACP slightly higher at $1,300/tonne.

Spot prices in the region are pegged at around $1,280-1,290/tonne CFR Taiwan in a quiet market. Only three deals were concluded last week, with activity muted because of slack demand downstream.

European PX has again been quiet with no business concluded since the previous Friday. Numbers, however, are notionally up on decent derivative demand and firmer xylenes at $1,260-1,290/tonne. An ongoing outage in Gelsenkirchen, Germany, combined with rumoured Russian production problems, has had a tightening effect on the market.

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