Chemical market trends: Global naphtha prices continue to soar

24 September 2007 00:00  [Source: ICB]

Global naphtha prices continue their uptrend on the back of higher crude values. European buyers bemoan acrylic acid targets, while Asian SBR contract discussions stall

Naphtha

Open-spec naphtha prices jumped to a two-month high in Asian trade last Tuesday, lifted by another record-breaking streak in benchmark crude futures.

The front-month second-half October naphtha contract rose to $711.50-714.50 (€505-507)/tonne CFR Japan. Prices then climbed as high as $726/tonne after crude futures surged above $82/bbl.

Despite the rally in naphtha prices, traders say the market is weighed down by a supply overhang because of ample exports from India and the Middle East.

However, they say bearish sentiment is reflected in spot trades that have been concluded at sharp discounts.

Increased export cargoes from India - estimated at more than 900,000 tonnes for October - caused the market to flip into contango from August, note traders.

Acrylic acid

Targeted fourth-quarter (Q4) hikes of around €100 ($141)/tonne for acrylic acid and acrylate ester contracts are excessive, say European consumers.

Buyers argue that the acrylic acid, ethyl acrylate (EA) and methyl acrylate (MA) markets are well balanced, and although heavy esters butyl acrylate (BA) and 2-ethyl-hexyl acrylate (2-EHA) supplies are tighter, they are not as snug as producers describe.

Dow Chemical is targeting an a further €50/tonne increase from October 1, in addition to the €50-80/tonne announced for September 1. Another European seller is aiming for an €80/tonne hike on acrylic acid prices, and €100/tonne for all acrylate esters.

Decent demand, planned and unplanned outages in the US, reduced imports from Asia to Europe, and high raw material costs are the main reasons for the announcements, according to sources at the two companies.

Low density polyethylene

Colombia's sole producer, Ecopetrol, increased prices of low density polyethylene (LDPE) by 1.2% from last Tuesday, to compensate for price variations in international markets and to cover currency fluctuations.

Numbers are revised each week to keep domestic prices competitive with imports. Adjustments in the past few weeks mostly compensated for currency movement.

Bagged LDPE material is quoted at Colombian pesos (Ps) 4,161/kg ($1,982, €1,411/tonne) for cash transactions.

Polyvinyl chloride

Indian demand for polyvinyl chloride (PVC) is expected to grow by 15% to 1.4m tonnes in the financial year ending March 31, 2008.

"In the first five months of the year (April-August), demand for PVC in India is estimated at 580,000 tonnes, a 19% increase from the same period last year," says C Paparao, senior executive vice president of Reliance Industries' PVC and polyethylene (PE) business.

The construction sector and water, sanitation and irrigation pipes segment are the main demand growth drivers, says Paparao.

PVC capacity in India only totals about 1m tonnes/year, the shortfall plugged through imports, which have been rising.

The robust demand and tight supply have driven Reliance and Finolex Industries, India's main PVC producers, to import large volumes from Northeast and Southeast Asia.

Paraxylene

European spot paraxylene (PX) prices have risen for October material because of high crude numbers.

Traders say material is offered for October at $1,020-1,025/tonne FOB Rotterdam. September bids and offers are heard at $990-1,010/tonne, but no deals have been done.

Purified terephthalic acid

The contract settlement for August purified terephthalic acid (PTA) in Taiwan has been agreed down $5-10/tonne from the previous month at $915-920/tonne DEL.

Oversupply is cited as the main reason for the price drop. Some players say lower spot averages for August in the key Chinese market also contributed to the reduction.

The spot average for August in China was slightly above $900/tonne CFR, down from the July price average of $930/tonne.

Polystyrene

A 3 cent/lb price hike for US polystyrene (PS), scheduled for October 1, is likely to succeed due to the volatile benzene market.

A PS buyer says the nomination is purely cost-driven and has a good chance of success, despite moderate domestic demand.

The source notes that the spike in crude values is placing upward pressure on benzene. Also, PS and feedstock styrene monomer (SM) producers are struggling to protect and maintain margins.

Styrene butadiene rubber

Some Asian styrene butadiene rubber (SBR) Q4 contract talks are deadlocked, despite producers insisting on settlements last week.

Sellers have raised contract offers of non-oil grade 1502 to $1,800-1,850/tonne CFR Asia, justifying the $100/tonne hike on limited availability.

Some customers are said to have settled around $1,800/tonne to secure supply. However, others are still resisting the hike and are, instead, asking for a rollover. Q3 contracts settled at $1,700-1,750/tonne.

One Indian tire producer argues that it is not sustainable to raise SBR prices, given that the fourth quarter is likely to see a slowdown in the US economy, which is one of the main demand drivers.

Urea

Imports of urea fertilizer into Argentina are likely to reach 500,000 tonnes in 2007, said an executive from the country's largest domestic producer, Profertil, at last week's Fertilizer Institute conference in Boston, US.

Imports have boomed because Profertil lost around 270,000 tonnes of production at its Bahia Blanca plant due to government-enforced gas cutbacks. Around 300,000 tonnes are scheduled to arrive in September alone, said the source. Industry statistics show that only 40,000 tonnes of urea were imported during the whole of 2006.

In addition, high wheat prices have seen the area planted with wheat rise by 12-13%, further boosting fertilizer demand.


Iso-propanol spot prices continue downtrend

European spot iso-propanol (IPA) values have slipped €50/tonne in the past six weeks, but sellers are confident that demand will return in the second half of September.

After almost a five-month-long upward price trend, lackluster demand and healthy supply triggered the downturn, with prices reported in a €990-1,030/tonne FD NWE range.

Buyers say this is a natural correction of prices, which had been pushed up due to a shortage of product. European IPA supply has tightened since March because of numerous production issues.

Meanwhile, sellers and buyers are eyeing the ongoing discussions for the upstream fourth-quarter propylene contract. Propylene suppliers are targeting small increases based on cracker maintenance and the high cost of oil, while consumers expect improved availability, and are aiming for prices to stay stable or drop slightly.





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