Market trends & data: Prices remain sky high

14 April 2008 00:00  [Source: ICB]

Gasoline breaks another record. Healthy demand, stretched supply and high feedstock costs help boost prices across markets. Russian polypropylene may face shortage

GASOLINE

European benchmark 10ppm (parts per million) summer-spec gasoline reached a new record price last Wednesday. Barges were trading at $958/tonne FOB ARA.

The latest high followed the publication of the US Energy Information Administration's stock data, which showed a 3.4m bbl drop in US gasoline stocks - the second successive weekly decrease. Although this had been expected, it was still larger than the 2.5m bbl fall forecast by analysts.

MONOETHYLENE GLYCOL

Improved demand, less material and fewer sellers in the market has given Europe's bulk spot monoethylene glycol (MEG) numbers a boost, say sellers.

Prices are reported at €790-800/tonne CIF NWE T2 (customs cleared), up from the low-€700s in March.

Maintenance outages are said to be behind the upturn in pricing, along with few import opportunities.

Truck prices have also been climbing, but not at the same pace. Values are around €800/tonne FCA NWE, with traders targeting €810-830/tonne for April.

VINY CHLORIDE MONOMER

Tosoh - Japan's largest vinyl chloride monomer (VCM) producer - has raised its prices by $40/tonne for a second month in a row because of strength in the downstream polyvinyl chloride (PVC) market.

Deals for April VCM settled at $890/tonne CFR China, up from $850/tonne in March. February cargoes were sold at $810/tonne.

Producers expect VCM to continue climbing in May because of rising PVC prices.

April PVC cargoes were sold at $1,110-1,130/tonne CFR China Main Port and sellers expected May PVC prices to rise by another $40-50/tonne.

POLYPROPYLENE

Russia could suffer a plastics shortage in the next few weeks owing to the unplanned shutdown of a polypropylene (PP) plant and upcoming maintenance turnarounds.

Stavrolen, controlled by Lukoil-Neftekhim - a subsidiary of Russian oil major Lukoil - shut its 120,000 tonne/year PP unit in Budyennovsk after an explosion killed three.

Kapotnya's and Ufaorgsintez's PP units are also starting turnarounds later this month.

ISOPROPANOL

Indian isopropanol (IPA) prices have continued their uptrend, rising $25/tonne week-on-week to $1,275-1,325/tonne, because of supply issues and high feedstock costs.

IPA supplies are tight because an Indian producer is to start a two-week outage in May. High propylene prices are adding pressure.

Offers for 1,000 tonne cargoes are heard at $1,325-1,400/tonne CFR India for May delivery, with bids at $1,250-1,275/tonne.

EPICHLOROHYDRIN

Epichlorohydrin (ECH) prices in China ­continue to decline, due to reduced downstream demand.

Values have dropped by yuan (CNY) 500-1,000/tonne ($71-142/tonne) over the past few weeks to CNY14,500/tonne, say traders. ECH was at CNY16,000-16,500/tonne ex-warehouse (EXWH) in early March.

BUTADIENE

Europe's initial second-quarter (Q2) butadiene (BD) contract has emerged at €980/tonne FD NWE, marking a €90/tonne increase on the previous quarter's settlement.

An increase had been anticipated owing to a tight supply/demand balance and elevated naphtha costs. One seller had announced targets of as much as €150/tonne.

MIXED XYLENE

A second US April mixed xylene (MX) contract has been heard at $3.40/gal FOB, representing a gain of 20 cents/gal on March, and up from an initial April contract of $3.35/gal.

Numbers are up because of stronger demand and higher spot values compared with a month earlier. Current spot prices are $3.40-3.45/gal FOB Houston-Texas City.

ORTHOXYLENE

Initial US April orthoxylene (OX) contracts have climbed by 2.50 cents/lb to 54.50 cents/lb FOB US Gulf.

Sellers were vying for a 5 cent/lb increase, while buyers had been calling for a rollover.

STYRENE

The April free carrier (FCA) styrene contract has settled down €32/tonne at €1,090/tonne in Europe due to lower feedstock costs.

In the US, initial March styrene contracts rose by 4.50-5.25 cents/lb from February to 71.00-74.25 cents/lb because of tight supplies and a higher benzene contract.

March benzene settled at $3.97/gal FOB.

ACETIC ACID

European acetic acid buyers are hoping to claw back lost margins in Q2, and are eyeing decreases of as much as €100/tonne.

Consumers appear confident of success, following the hefty €195/tonne drop in upstream methanol contracts to €295/tonne FOB Rotterdam.

However, some producers say they are determined not to give away too much margin, given the recent lack of price increases.

Q1 acetic acid rolled over from the fourth quarter of 2007 at €997-1,056/tonne.

SULFUR

Initial Q2 liquid sulfur contracts in the US Gulf have climbed by $200/long ton, compared with the previous quarter, to around $450/long ton CFR Tampa.

Strong demand, tight supply and higher international prices are said to be behind the significant increase.

US CAUSTIC SODA BUYERS NEAR BREAKING POINT

Caustic soda prices may have peaked in the US, as further increases could open up arbitrage opportunities for potential new competitors, says one North American trader.

Domestic spot prices rose by 26% to $510-550/DST (dry short ton) FOB US Gulf during the first quarter - the increase attributed to steady demand and tightening availability worldwide.

"Buyers won't stand for spot prices much higher than they are," says the source. "If it were to go up any further, they would start looking to places like Saudi Arabia and India for long-distance shipments." The trader adds that shipping costs would normally prevent producers from these countries competing in the US market.

However, it is unclear if these dynamics will put the brakes on fast-rising contract prices, says the trader. Large-volume buyers might not be able to secure enough material to meet demand.

Low chlor-alkali production in the US is predominantly the result of weak demand from the ­housing market for caustic soda's co-product, chlorine. However, relief could come from an upswing in new US home construction. The March restart of US producer Olin's chlor-alkali plants after a six-week force majeure should also help improve the supply situation.

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