UpdateChina mkts jittery after Maoming fire

04 June 2008 07:49  [Source: ICIS news]

By Bohan Loh

SINGAPORE (ICIS news)--As the effects of the fire and consequent shutdown of Maoming Petrochemical’s 1m tonne/year cracker and its derivative units begin to be felt, sellers are becoming increasingly hesitant to commit to fresh trades since they expect prices to rise on a tightening of supplies, market players said on Wednesday.

Asian polyolefins producers and traders have withdrawn their offers to China in anticipation of higher prices following the fire at the Sinopec subsidiary late on Tuesday, and also due to Sinopec’s plans to cut petrochemical production in June, traders and producers said.

"We are not offering our remaining June cargoes because we believe prices will rise further," a South Korean producer said.

However, another trader said ethylene (C2) and propylene (C3) prices were not expected to be directly impacted as Maoming channels its olefins from the crackers for captive use in its downstream polyolefin plants.

However, he did not rule out the possibility of higher prices in the polypropylene (PP) market, which might in turn drive up feedstock C3 prices.

Buying ideas for imported C3 cargoes increased over $70/tonne to $1,640/tonne CFR (cost and freight) China in line with PP prices, which have been rising due to tight supply since early this week.

Polyethylene (PE) prices were also expected to rise after Maoming shut down its 370,000 tonne/year low density polyethylene (LDPE) unit, 200,000 tonne/year linear low density and high density PE (LLDPE/HDPE) swing plant, and 350,000tonne/year HDPE unit.

An east China-based trader said, "We have yarn-grade PP and injection grade HDPE of Iranian origin, Malaysian film grade HDPE and LDPE on hand, but we are not offering these on the market at the moment."

"Most traders have stopped making offers now because they are trying to digest the news, and prices are generally expected to rise further," he added.

"Supply of film grade HDPE and LLDPE in south China would be tight as the cracker accounts for quite a substantial share of the south China market," a Taiwanese producer said.

This would consequently raise prices of Chinese HDPE exports to India, a major buyer, said a regional trader.

Sources in the polyester industry were also worried that the fire would impact feedstock ethylene prices, which could in turn trigger a firming in monoethylene glycol (MEG) values.

Even as some traders worried about price hikes, traders in south China believed the shutdown would have a limited impact on prices.

The impact on aromatics has been limited in the south China market, said local traders, adding that Maoming Petrochemical has not made any announcements relating to cuts in aromatics production.

"However, some traders in the market could have started buying up in anticipation of an impact and a subsequently price hike", a local trader said.

Offers for toluene and solvent grade xylene were heard on Wednesday morning at yuan (CNY) 10,400-10,500/tonne ($1,500 - $1,515) ex-tank, up CNY 200/tonne and CNY 100/tonne respectively from Tuesday’s close, according to global chemical market intelligence service ICIS pricing and CBI.

The tight situation in the aromatics market could be further compounded by Sinopec’s plans to temporarily shut down or bring forward the maintenance turnarounds at its Zhongyuan, Dongfang and Shanghai No 1 and 2 ethylene units.

Earlier, the company has reportedly indicated a reduction in operating rates at Yanshan Petrochemical, Qilu Petrochemical, Maoming Petrochemical, Tianjin Petrochemcial, Guangzhou Petrochemical and Shanghai Secco Petrochemical.

Chow Beelin, Prema Viswanathan, Mahua Chakravarty, Hong Chou Hui, Dolly Wu, Jade Xu and Judith Wang have contributed to this story.

($1 = CNY 6.93)

For more on these chemicals visit ICIS chemical intelligence
To discuss why this fire started and spread along with issues facing the chemical market in China as a result of this go to ICIS Connect.

By: Bohan Loh
+65 6780 4359

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