Chemical market trends & data: Price surge is relentless

26 May 2008 00:00  [Source: ICB]

CRUDE OIL

Crude oil saw further gains last Thursday, with July NYMEX light sweet crude futures peaking at $135.04/bbl because of an unexpectedly large decline in US crude stocks and the weakening dollar.

Meanwhile, July ICE Brent futures reached a new record high of $134.50/bbl.

Prices surged as data from the US-based Energy Information Administration showed an unexpected decline in crude stocks of some 5.4m bbl. Analysts had forecast a build of around 600,000 bbl.

POLYPROPYLENE

Polypropylene (PP) prices in China are expected to reach a new 10-year high by the end of May, or early June, because of surging feedstock costs and tight supply.

With propylene feedstock values in excess of $1,500/tonne CFR Northeast Asia, one producer suggests injection and yarn-grade PP will soon reach $1,700/tonne CFR China.

The seller said last Wednesday that it expected crude to hit $135/tonne in June or July due to the US driving season, naphtha to therefore climb to $1,200/tonne CFR Japan and propylene prices to rise further.

The bullish sentiment for PP is also supported by the perception that many importers in China have low inventories.

BUTADIENE

A US butadiene (BD) producer has nominated a June contract increase of 10 cents/lb, after two other producers proposed hikes of 9 and 15 cents/lb.

The price push is blamed on firm demand and tight supply of feedstock crude C4.

Another producer is said to be planning to seek an 11 cent/lb increase.

However, it is thought likely that the rise will be limited to 9 cents/lb as the contract usually settles at the lowest nomination.

May contracts were agreed at 77 cents/lb, up by 8 cents/lb from April.

BENZENE

Fresh crude highs and renewed buying interest led to another all-time high spot deal for European benzene last Wednesday. An inter-trade deal was done for June ­loading at $1,280/tonne CIF ARA. Another deal followed later that afternoon at $1,300/tonne.

Players attribute the high to demand, record crude and a surge in styrene values.

At the same time, styrene monomer (SM) was heard trading at $1,600-1,610/tonne FOB Rotterdam for June.

TOLUENE

Asian toluene numbers hit a 14-year high at $1,200/tonne FOB Korea on Wednesday. This was surpassed on Thursday with a deal at $1,240/tonne.

Meanwhile, a spot toluene deal was heard done at $1,100/tonne CIF Rotterdam in Europe last Tuesday - breaking another record. High gasoline values were cited as a major factor behind the hike.

EXPANDABLE POLYSTYRENE

Asian expandable polystyrene (EPS) spot prices have risen by $50/tonne in a week to an 11-year high. This is due to high crude and firm styrene costs.

Spot prices for packaging-grade EPS have reached $1,610-1,630/tonne CFR China.

Prices may rise further, given that styrene values appear unlikely to ease.

ACETIC ACID

Ongoing supply shortages and a spike in feedstock values have bolstered Chinese ­acetic acid prices, say market players.

Plant shutdowns and a heavy turnaround schedule in China and Southeast Asia have coincided with a series of minor outages at Jiangsu Sopo's 600,000 tonne/year production line in Zhenjiang, Jiangsu province, to limit availability.

Key local producers raised offers to yuan (CNY) 5,800-5,900 ($833-848)/tonne ex-tank and above last week because of the tightness, but deals were largely concluded at around CNY50-100/tonne lower. This represented a third round of price hikes so far this month.

The outlook is bullish, with prices expected to break the CNY6,000/tonne ex-tank level this week.

METHYLENE CHLORIDE

A drop in US methylene chloride values, thanks to abundant supply and a steady decrease in prices for feedstock methanol, may erase the price hikes producers achieved during the winter.

Prices have fallen by $88/tonne to $926-1,014/tonne ex-tank US East coast. In December 2007, producers had passed through increases of around $200/tonne.

After hitting an average high of $1,168/tonne early this year, methylene chloride prices are now back in line with levels seen last October.

The price cut also reflects decreased barge contract costs for methanol. May contracts are at $504/tonne - down from an all-time high of $885/tonne FOB US Gulf in December.

AMMONIA

June's Tampa ammonia price is down by $40/tonne from May at $510/tonne CFR.

A lower price was expected following a drop in Yuzhny ammonia and weaker demand from the US. Some sources think prices will rise again in July.

FERTILIZERS

The Chinese government has extended the export duty on all fertilizers to December 31, according to sources on the sidelines of last week's International Fertilizer Industry Association conference.

Export tax on diammonium phosphate (DAP) and monammonium phosphate is currently 135%. Triple super phosphate is subject to 130% duty, while export duty on phosphate rock is 120%.

 

PE PRODUCER EYES LARGE HIKE TO BOOST MARGINS

Producer Dow Europe has announced a hefty €150/tonne price increase for all of its polyethylene (PE) products for June, as it hopes to boost margins in the face of soaring costs upstream.

"It is imperative that we restore margins to prevent business from becoming unaffordable and to avoid having to make asset decisions at a time when we are experiencing strong demand," says Isidro Quiroga, commercial vice president for basic and performance plastics for Europe and India, Middle East, Africa. Dow has already opted to reduce high density polyethylene (HDPE) output by 20% at its Tessenderlo facility in Belgium because of poor profitability.

The scale of the hike surprised buyers. One argues that the market is not robust enough for the hike and says there is plenty of material available. Prices have fallen for the past three months, despite a €15/tonne increase in second-quarter ethylene contracts, and rocketing oil and naphtha costs.

Low density polyethylene (LDPE) is trading at around €1,300/tonne FD NWE for May, although these gross prices are subsequently discounted. Net spot levels are heard closer to €1,200/tonne.

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