Chemical market trends and data: Commodities skyrocket

12 May 2008 00:00  [Source: ICB]

Asian benzene values climb to highest levels since 2004, while a Taiwanese butadiene seller settles contract up $120/tonne. New record for European toluene contract


Benchmark 10ppm (parts per million) premium unleaded gasoline has reached a record $1,023/tonne freight on board Amsterdam-Rottedam (FOB AR) in Europe.The deal was triggered by crude oil values reaching $122/bbl.


Soaring crude values supported the efforts of US polyethylene (PE) producers to raise April prices by 3 cents/lb, ending six months of failed attempts to pass through costs.

Producers say they will look to implement the second half of a 6 cent/lb price increase in May, but buyers question whether the market is strong enough for a further hike.

Another 5 cent/lb price hike is scheduled for June, but has already been postponed several times, say buyers.

Following the April increases, US domestic prices for low density polyethylene (LDPE) film are at 80-84 cents/lb delivered.


Initial US vinyl acetate monomer (VAM) settlements for the second quarter (Q2) have fallen by 1-2 cents/lb, or $22-44/tonne. Q1 contracts were agreed at 68-72 cents/lb.

One buyer says the reduction stems from weakness in the domestic paint industry, which is reeling from the US housing slump.

Export prices have also dropped in the second quarter, to $1,200-1,250/tonne FOB.

US new home construction in March was down by 20% compared with the same period last year - a 17-year low in housing starts, according to the Commerce Department.


A major European producer has followed the May monoethylene glycol (MEG) settlement at €890/tonne FD NWE, saying it is a "fair compromise."

This represents a €25/tonne increase on the initial contract settlement and is €80/tonne down on the April figure.

Confirmation from both consumers was not immediately available.

Other large polyethylene terephthalate (PET) producers are frustrated at the price, with comments that the buyers involved were too small to settle the European price.

"We do not recognize the €890/tonne level, we will wait to see what the other major PET sellers do," says one consumer, who had settled at the initial €865/tonne price.


Taiwan's Formosa Petrochemical Corp. has settled its April butadiene (BD) contract price at $1,684.90/tonne pipeline delivered, up by almost $120/tonne from its $1,566/tonne March settlement.

Taiwan's BD contract is settled retroactively, with its pricing formula linked to the Asian spot price and US contract price.

The US April contracts settled at 69 cents/lb, up by 5 cents/lb from March. In Asia, May spot offers have soared to around $1,950/tonne cost and freight (CFR) Northeast Asia, up by about $300/tonne from March.


Asian benzene has breached $1,200/tonne, taking it to its highest levels in four years.

The soaring prices follow record high crude values, higher prices in the US and Europe, and tight supply in Asia.

Last Tuesday, prices were reported at $1,210-1,220/tonne FOB Korea. Offers for big berth June loading cargoes were at $1,220-1,248/tonne, with bids at $1,190-1,200/tonne.

The steep increases seen on Tuesday were largely due to an overnight hike in crude values to $120/bbl, say traders. Tight supply, especially in Japan, is also having an impact.

Prices were last seen above the $1,200/tonne level in August 2004, with numbers reaching $1,230-1,250/tonne.


April's caprolactam contract in Europe has settled down €30/tonne on the previous month due to lower demand. The pre-­discounted contract is now in a €1,934-1,975/tonne FD NWE range.

Caprolactam (capro) producers had originally pushed for a rollover from March to April, citing healthy demand and higher energy and production costs.

Upstream, the benzene contract settled down €45/tonne in April.


European toluene players have confirmed contract hikes of $52.50-65/tonne for May at record highs of $1,022.50-1,030/tonne FOB Northwest Europe (NWE).

This is attributed to a strong spot market, buoyed by crude oil and gasoline prices.


Canadian producer Methanex could ramp up its Chilean methanol plants to full capacity, from current 33% levels, within a year.

This follows its agreement with Chile's state-owned gas company Empresa Nacional del Petroleo to supply natural gas to the producer's 3.8m tonne/year methanol complex near Punta Arenas.

The site has run at reduced rates since Argentina halted natural gas exports to the site last year. Analysts suggest that exports from Argentina are unlikely to resume.


Acetone prices have fallen by $40/tonne in India to $1,030-1,040/tonne CFR India, owing to softening demand from end-users.

Buyers remain on the sidelines amid expectations that prices will ease.

Meanwhile, spot numbers in China have seen a sixth successive weekly drop, falling by $20-50/tonne. They could remain weak due to sluggish demand and ample supply.

Weak domestic prices have seen sellers lowering offers to move cargoes. Offers of import cargoes are $20-50/tonne down from late-March at $980-1,020/tonne CFR China.


A glut of butanediol (BDO) supply in China has seen prices tumble by more than yuan (CNY)1,300/tonne ($186/tonne) - around 8% - since mid-March and is likely to continue impacting prices for the remainder of the month. BDO prices are currently pegged at CNY15,700-16,000/tonne on a delivered basis in East China.

The downturn stems from large volumes of imports entering the country late last year, the start-up of Nan Ya's new BDO unit in Taiwan and a regular influx of deep-sea cargoes from Saudi Arabia.

Although it is the peak production season for downstream markets, such as polyurethane (PU), this increased demand has not been sufficient to absorb the excess supply.

With all major Chinese producers operating normally and no shutdowns planned in the coming months, producer inventories remain high.

The impending start-ups of new plants including Xinjiang Markor in June and the scheduled expansion of the Shanxi Sanwei plant in August should also keep China well supplied.

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