Asia petchems muted amid record energy values

11 March 2008 04:22  [Source: ICIS news]

SINGAPORE (ICIS news)--Traders’ speculation which pushed Nymex futures above $108/bbl overnight on Monday, had limited impact on the Asian petrochemicals market.

Crude futures rose $2.75/bbl overnight on Monday as speculators continued to buy crude oil contracts as a hedge against the declining US economy and soft US dollar.

Despite buoyant energy numbers on Tuesday morning, reaction from the petrochemicals markets was mostly tepid with spot ethylene prices on a downtrend and naphtha crackers across Asia under pressure to scale back production.

Rising crude values had seen naphtha prices climb to record levels in the past few months prompting Asian producers to scale back production with several cracker operators, including South Korea’s SK Energy and Yeochon NCC (YNCC), cutting production between 5-20% from March onward.

Other naphtha crackers such as Singapore’s PCS and Thailand’s Rayong Olefins have also scaled back production by 5-10% and have favoured spot ethylene purchases instead. 

More than a third of the aromatics plants in Japan and southern Korea had also reduced rates in the face of surging naphtha values.

Producers like Japan Energy, Nippon Oil Corp and Korea’s SK Energy and GS Caltex Oil had also cut back aromatics production.

With major reformers reducing supply, aromatics prices were expected to remain stable-to-firm going into the second quarter.

Hence, there was a limited impact of the rally on the Asian benzene market with prices notionally assessed stable from Monday’s close at $1,065-1,075/tonne FOB (free on board) Korea.

Discussions were limited for prompt cargoes, with a single bid heard for a normal berth second-half April loading parcel at $1,050/tonne FOB Korea.

Traders were heard waiting at the sidelines, wary of the volatility in the crude market, while ample inventory in Asia was also weighing upon buyers’ sentiment, a Japanese producer said.

Toluene prices held steady at $985-995/tonne FOB Korea on Tuesday, with a bid for any April loading heard at $985/tonne FOB Korea. No offer was heard.

Bucking the trend, styrene monomer (SM) prices were up some $5-10/tonne today with buy-sell indications for April parcels posted around $1,415-1,440/tonne FOB Korea.

However, traders did not expect further upside from this level, given ample stocks in Asia.

In eastern China, offers rose yuan (CNY) 100-150/tonne ($14.08-21.13) to CNY11,800/tonne ex-tank while buyers adopted a wait-and-see stance.

Paraxylene (PX) selling indications were also higher at $1,270/tonne CFR (cost & freight) Taiwan for April loading, after one deal at $1,260/tonne late Monday.

Buyers acknowledged that some bids at $1,250/tonne had emerged, as buying interest remained strong.

A soda ash seller in SE Asia lamented that high crude values would squeeze margins further as transportation costs would continue to increase.

“The freight charges will probably be raised since our cargoes come all the way from Europe. At this rate, whatever margins we’re making will go to the shipping companies so we might as well be working for them.”, he said.

Steve Tan, Mahua Chakravarty and Hong Chou Hui contributed to this article.

($1=CNY7.10)  

By: Clive Ong
+65 6780 4359

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