Chemical market trends

Supply is central to talks

29 October 2007 00:00  [Source: ICB]

Availability dominates markets: EG prices rise in the US, while European PA values fall. Chlorine output drops, denting caustic soda supply. China's PVC exports triple to India

Crude

Crude prices rose by more than a dollar last Thursday morning, taking Brent crude on London's ICE Futures above $86.00/bbl for the first time. This was due to speculative interest after Wednesday's US data showed unexpected draws on crude stocks.

December prices hit a high of $86.28/bbl, before easing back to around $85.95/bbl.

Butadiene

ExxonMobil and Equistar - two of the four major US butadiene (BD) producers - have nominated a 1 cent/lb increase to 56 cents/lb FOB US Gulf for November contracts because of rising energy costs.

Shell and Texas Petrochemicals have yet to make their nominations.

However, a styrene butadiene rubber (SBR) buyer says a 1 cent/lb decrease is expected because of adequate supply.

One source speculates that the producers were reacting to the shutdown of a butadiene pipeline a few weeks ago.

Chlorine

US chlorine output dropped in September and may continue to fall for several months, says a producer.

Demand typically wanes in the autumn months, as home construction slows due to cooler weather.

Trade group the Chlorine Institute says output was 95% of capacity in September, down from 97% the previous month.

Producers suggest that rates will fall further over the coming months and could dip to as low as 85% of capacity during the winter.

Players say the slowdown will further tighten supplies of co-product caustic soda.

Polyvinyl chloride

Polyvinyl chloride (PVC) exports from China to India tripled year-on-year in the first eight months of 2007 - a trend that is expected to continue due to the growing shortage in the subcontinent.

Imports into India from China surged to 183,510 tonnes in January-August, up from 59,499 tonnes during that period last year, according to China's customs department.

With demand to grow by 15% to 1.4m tonnes/year, India is expected to import around 450,000 tonnes of PVC in the year ending March 31, 2008, says a supplier. This compares with 340,000 tonnes in 2006-2007.

Meanwhile, rising ethylene prices have seen US PVC producers nominate a 6 cents/lb hike for November.

Prices settled up 2 cents/lb for October, pushing prices to 54-56 cents/lb for pipe-grade resin and 58-60 cents/lb for general-purpose grade.

Ethylene glycol

Tight global supply has enabled US ethylene glycol (EG) producers and resellers to successfully pass on November price hikes ahead of schedule, says one distributor.

Producers recently announced that they would seek price increases of up to 6 cents/lb for EG, beginning November 1. That would put the EG benchmark at 70 cents/lb.

However, industrial grade EG (EGI) has already been sold in the low 70s cents/lb to small-volume customers, says the source.

Supply is expected to remain tight at least through the first half of 2008.

Ethylene diamine

Most European fourth-quarter (Q4) ethylene diamine accounts have been agreed up €40/tonne, due to firmer upstream costs and tightening supply.

Price increases of €20-50/tonne have been reported, with smaller increases reflecting business concluded on larger accounts with an already high base price. Ethylene diamine numbers are now pegged at around €1,835-1,960/tonne FD NWE.

While the Q4 ethylene hike had pushed costs higher, producers also cited an ­ongoing pull on European product from buoyant Asian markets as a justification for the hikes.

In an unprecedented move, one seller says it will seek another €50/tonne premium from November 1, citing the same reasons.

Purified terephthalic acid

September purified terephthalic acid (PTA) contracts in Taiwan have been agreed ­retroactively at $870-880/tonne delivered, representing a $40-45/tonne drop on August.

Demand was weak for September, as the downstream polyester sector saw reduced profits because of price increases for raw material monoethylene glycol (MEG).

MEG prices shot up by more than $250/tonne from August to September, following a significant outage in Saudi Arabia. This slashed polyester producers' margins, meaning some were loss making.

Polyethylene terephthalate

Most October accounts in the European polyethylene terephthalate (PET) market have settled up €40-60/tonne.

Gross prices for bottle-grade material are €50/tonne higher at €1,410-1,500/tonne FD West Europe.

Producers had initially targeted €90-110/tonne hikes, citing firm feedstock costs.

They were also keen to recover margins that were lost in a period of extremely weak demand during the traditionally strong ­summer season.

Net spot values have also moved higher, trading at around €1,100-1,150/tonne.

Phthalic anhydride

October settlements for freely-negotiated European phthalic anhydride (PA) are reported down €15-55/tonne at €1,170-1,235/tonne FD NWE for molten product and €1,145-1,235/tonne for flake.

Buyers say securing decreases in line with downstream orthoxylene (OX) movements had been possible for the first time in months due to an improved supply situation.

Producers had remained reluctant to give away the full decrease, with some taking a firmer stance than others.

Ailing ACN numbers mark end of 10-month run

The Asian acrylonitrile (ACN) 10-month uptrend has run out of steam, thanks to slackening demand and falling domestic prices in China, with producers clearing inventories before the end of the year.

Domestic prices in China have fallen by yuan (CNY) 300500/tonne ($4067) to around CNY18,500/tonne ex-tank at Lianyungang port subsequently dampening sentiment and weighing on buying indications for import cargoes.

Jilin Petrochemical discounted ACN domestic prices in a bid to clear its inventories before the end of the year, says one Chinese trader, but this reduction has come sooner than expected and dampened buying sentiment for imported material.

One buyer adds that a workable price for import cargoes is now no higher than $1,900/tonne CFR China, with demand from acrylic fiber (AF) makers downstream waning.

AF domestic prices have dropped by about CNY200300/tonne to CNY18,50019,000/tonne.





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