01 October 2007 00:00 [Source: ICB]
Snug supplies and the firming energy complex push prices higher, although PA bucks the trend and contracts fall. Asian palm oil values continue ascent, threatening market
Huntsman is restarting its 1.4bn lb/year (635,000 tonne/year) Port Arthur, Texas, olefins cracker in the US, which has been idled since a fire in April 2006.
The restart should relieve tightness partly caused by the September 13 landfall of Hurricane Humberto in eastern Texas, says Deutsche Bank.
Meanwhile, there are reports that DuPont has declared force majeure at its Orange olefins cracker in Texas. The plant ran into problems after it went down following a power outage caused by Humberto.
DuPont's cracker accounts for 2% of the North American ethylene supply.
Two other crackers in the region, operated by ExxonMobil and Chevron Phillips Chemical, were also halted by the storm, as well as three oil refineries.
Tight global supply has propelled spot vinyl acetate monomer (VAM) prices in Northeast and Southeast Asia to record highs following higher-priced October business.
VAM has risen by $50-100/tonne to $1,350-1,550/tonne CFR in those regions.
Higher-priced October business is reported in Southeast Asia, pushing prices up to $1,350-1,450/tonne CFR SE Asia levels, up $50/tonne from September business.
This follows a fresh round of price hikes announced by US-based producers last month: Millennium Petrochemicals announced a $180/tonne hike from October 1, soon after Celanese at $220/tonne.
The first European fourth-quarter (Q4) propylene settlements were reported last Monday, up €10/tonne from the previous quarter. The increase to €888/tonne FD NWE came on the back of firming naphtha raw material costs.
Asian acrylonitrile (ACN) spot prices are poised to rise further despite cuts in operating rates at acrylic fiber (AF) plants.
Bids as high as $2,000/tonne CFR China are heard for prompt shipments, as a global supply crunch lifted prices to fresh highs.
The rise in ACN spot values has led several Chinese AF sellers to cut operating rates by 20-50%. Some say the skyrocketing ACN prices could mean a rationalisation in the AF industry and some unprofitable plants going out of business.
Producers have nominated the US October benzene contract at $3.80/gal, up 44 cents/gal on September levels. The higher nominations are based on the high energy values seen in September, which led to strong benzene spot prices.
Current spot values are pegged at $3.52-3.53/gal FOB HTC (Houston-Texas City), up from $3.37-3.39/gal a month earlier.
High crude oil prices are providing support for US aromatics such as toluene, and keeping prices near their summer peak, says a distributor.
Typically, toluene prices quickly wane following the end of the US driving season.
This year, a record-high retail price for gasoline in late May sent toluene prices to a peak of 46.44 cents/lb during the week of June 6. However, by the week of September 14, prices were still at 37.46 cents/lb - nearly 7 cents/lb above prices for the same week a year earlier.
A major US isocyanates producer is targeting a 10 cents/lb increase on toluene di-isocyanate (TDI) for October 15.
The producer says it postponed a 5 cents/lb hike, originally targeted for October 1, to October 15, and proposed an additional 5 cents/lb rise. US 80:20 TDI prices are reported at 160-166 cents/lb delivered bulk.
The proposed increase is driven by strong global demand amid supply volatility, and unpredictable feedstock and energy values.
The supplier says the hike would bring US TDI prices more in line with other regions.
European phthalic anhydride (PA) September contracts have fallen to €1,200-1,290/tonne FD NWE for both molten and flake material.
This reflects a drop of €70/tonne on molten contracts, in line with the September decrease of orthoxylene (OX) upstream, and an €85/tonne fall for flake material, owing to an improved supply and demand balance.
Larger decreases were possible on flake accounts because supply improved significantly, following several planned and unplanned outages in July and August.
Spot methanol continues to climb in Europe ahead of the Q4 contract settlement.
A trade was reported at €355/tonne FOB Rotterdam last Wednesday for Q4 delivery, €65/tonne higher than the previous trade a week earlier.
Suggestions of €340/tonne as a possible contract price are now deemed conservative after Statoil, Europe's largest manufacturer, declared force majeure at its 830,000 tonne/year unit in Tjelbergodden, Norway.
The Q3 contract price was €218/tonne.
Surging palm oil prices are on the verge of closing down the Asian biodiesel industry, warn regional producers.
Unable to afford the expensive feedstock, some firms delayed the start-up of their plants, and others are running at low rates.
Crude palm oil (CPO) third month futures on the Bursa Malaysia exchange were trading above ringgit (M$) 2,650/tonne ($773, €548/tonne) FOB last Wednesday.
CPO prices surged after a bullish report by industry pundit, Dorab Mistry, predicted that palm oil prices would stay at high levels of M$2,600-3,000/tonne in the wake of record high global wheat prices.
Increased food demand and high soybean prices in the US are key factors. Rising crude values are also behind the bullishness in the vegetable oil sector, says one seller.
Players question ethylene's bimonthly future
The credibility of Europe's bimonthly ethylene contract has been called into question, having initially settled at the same level as the quarterly contract.
Both fourth-quarter and October-November bimonthly contracts have risen to €945/tonne FD NWE, representing hikes of €20/tonne and €15/tonne, respectively.
One large seller says it reflects the extremely volatile and unpredictable raw material market. However, a major consumer argues that the quarterly increase is unfair on the derivative polyethylene (PE) industry, and does not take into account the supply/demand balance.
The increase is based on tightness in Europe and the recent sharp increase in naphtha, which has breached $700/tonne CIF NWE.
Although consumers accept there is pressure from oil and naphtha costs, they argue that this is offset by the weakening US dollar against the euro. Current cracker problems are only a short-term issue, says one source, and will not affect fourth-quarter supply.
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