FocusAsia aromatics makers cut operating rates

08 November 2007 03:15  [Source: ICIS news]

By Mahua Chakravarty

SINGAPORE (ICIS news)--Record-high naphtha values are pushing makers of benzene, toluene and xylenes (BTX) to cut operating rates, producers and traders said late on Wednesday.

Taiwan and Southeast Asian producers said that they had to reduce output due to high high feedstock costs, and a Japanese manufacturer said his firm was holding internal discussions on whether to follow suit.

“We are just producing enough to meet term commitments. Margins are mostly negative these days,” a Southeast Asia-based producer of benzene and paraxylene (PX) said.

The naphtha to BTX spread has been facing increasing pressure since mid-September as rallying crude pushed naphtha values higher by $138-140/tonne.

Open spec naphtha prices in Asia rose to a fresh record high on Wednesday in tandem with rising crude values. The second half December contract was notionally assessed higher at $841-844/tonne CFR (cost and freight) Japan.

Solvent grade xylene makers are already running at losses at the current spread of $39-56/tonne to naphtha, very much below the $150-200/tonne estimated to break-even.

Naphtha’s spread with toluene and isomer grade xylene is also below break-even point for producers at $126-138/tonne and $124-136/tonne respectively.

Benzene producers are doing better and breaking-even with spreads at $209-216/tonne.

Most aromatics producers remain loss-making despite being able to hike prices due to higher naphtha values.

Prices of all major products have increased 8-24% since mid September, although downstream conditions remained stable-to-soft across all markets.

Toluene prices have seen maximum gains of about 24% since the week ended 14 September, followed by isomer grade prices gaining about 13%, while benzene values firmed a modest 8% in comparison.

Traders and producers said that the increases were necessary in order to sustain production. “If prices don’t go up then there is no need to produce,” a producer said.

Rising toluene values in the past two months has squeezed margins of producers using the toluene disproportionation (TDP) and hydro de-alkylation (HDA) process. Toluene is used as a feedstock to produce benzene and mixed xylenes by the TDP and HDA processors.

The spread between benzene and toluene values was at $78-80/tonne, cutting deep into the margins of these producers. A gap of about $200/tonne between benzene and toluene prices is the estimated break-even point.

PX producers in Korea, Japan, Taiwan and Southeast Asia may also cut rates. A Taiwan-based producer said that there was limited spot availability and the plant was running at below full capacity.

The estimated break-even spread of $150/tonne between isomer grade and PX for producers had been breached in the past weeks, as PX prices remained below $1,100/tonne CFR (cost and freight) Taiwan, while isomer grade prices remained on an uptrend.

But the recent efforts by traders and producers to boost prices has resulted in PX prices firming to $1,120-1,135/tonne, boosting the spread with isomer grade to $155/tonne. Isomer grade prices were notionally assessed at $965-980/tonne FOB (free on board) Korea.

Benzene values in Asia at Wednesday’s close were assessed at $1,050-1,060/tonne, while toluene values were assessed at $970-982/tonne. Solvent grade prices were notionally assessed at $880-900/tonne.

By: Mahua Chakravarty
+65 6780 4359

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