OUTLOOK '08: Supply, feedstock threaten Asia BTX

27 December 2007 07:00  [Source: ICIS news]

By Mahua Chakravarty

SINGAPORE (ICIS news)--Asia’s benzene, toluene and mixed xylene (BTX) markets would be stable-to-weak on increased supply and higher feedstock costs in 2008, with the exception of the US summer driving season from March to June, said producers, traders and end-users.

The start of the driving season and the demand from the gasoline segment would result in BTX prices firming from the first-half of 2008, they said.

Prices would firm more than 2007, especially from March until June, said traders. Benzene prices were expected to go past $1,000/tonne FOB (free on board) Korea.

From October onwards, weakening demand from the downstream styrenics, especially from the expandable polystyrene (EPS) and acrylonitrile-butadiene-styrene (ABS) markets, could spark a softening trend in styrene monomer (SM) and benzene values.

Toluene and mixed xylene prices were also expected to firm from March until June, but the toluene uptrend could be derailed due to slower demand for imports from China from the second half of the year, said traders and producers. China is Asia’s largest market for toluene.

High feedstock costs could remain a chief concern for Asian BTX producers in the first quarter of 2008, continuing the relentlessly firm trend seen in crude and naphtha values from September 2007.

Some traders and producers felt that naphtha cracker operators could be forced to keep operating rates below 100% next year in order to recover costs. 

They envisaged a scenario close to the events seen in the past few months, with producers clamouring for price increases and seriously considering or implementing cutbacks in operating rates.

Toluene disproportionation (TDP) and hydro-dealkylation (HDA) operators using toluene as feedstock also expected that production margins would be severely squeezed in the first quarter of 2008, and a number of plants would continue to operate at lower production levels.

Hence, producers hoped that the uptrend expected from March ahead of the US summer driving season would push benzene prices higher and widen the benzene-toluene price spread.

Increased supply of benzene, toluene and isomer grade xylene in Asia, due to new capacities, was also expected to dampen sentiment and prices in Asia.

Benzene supply in Asia would be high due to the start up of new capacities in China and Thailand, and could dampen the market for periods in 2008. Increased exports to the US and other regions would be the key solution for handling the excess volumes, said traders.

Toluene supply in Asia would also remain high in 2008. The continuing high supply would be due to a further slowdown in demand from the Chinese market for Korean origin material, they added.

The start of Dalian Petrochemical’s new 450,000 tonne/year toluene plant from the second half of 2008 would add to the domestic supply level, said traders and producers.

Toluene imports into China have been on the decline in the past two years due to start-ups in the domestic market and competitive pricing strategy by local producers, leaving some Korean producers planned to export toluene to the US and other regions.

This would be in continuation of the trend seen from this year when some traders and a Korean producer were reported shipping toluene to the US in an effort to draw down supply within Asia.

Supply of isomer grade xylene in Asia would be ample as well, due to the start of increased capacities from 2007 at GS Caltex and Nippon Oil, said traders.

The start of Dalian Petrochemical’s new plant and a debottlenecking at a Korean plant would add further to the levels in Asia, said producers and traders. 

Imports from the US would also increase with the start of KP Chemicals’ new meta-xylene plant, said a Korean producer. KP Chemical is Asia’s largest buyer of isomer grade, and imports close to 40,000 tonnes every month from the US.

On the demand front, not much difference was expected for isomer grade xylene compared with the stable trend seen in 2007. But demand for benzene from the Middle East was expected to firm from the second quarter of 08, with the start of Chevron Philips' 700,000 tonnes/year SM plant in Al-Jubail, said traders.

On the other hand, US benzene demand from Asia was expected to weaken with the shutdown of a styrene plant by INEOS Nova next year, said traders and producers. US demand for benzene from other regions was estimated to be about 1.3 million tonnes/year, with Asia exporting about 40,000-50,000 tonnes/month on spot and contract basis.

By: Mahua Chakravarty
+65 6780 4359

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