US p-wax market may see relief soon

14 November 2008 21:37  [Source: ICIS news]

HOUSTON (ICIS news)--US paraffin wax (p-wax) suppliers have maintained steady prices despite recent declines in other regions, but substantial relief is coming quickly, market players said on Friday.

International wax players gathered at the National Petrochemical & Refiners Association’s  (NPRA) annual Lubricants and Waxes meeting on Thursday and Friday to discuss trends and gain insight to what has been a “shocking”’ year for all.

“The wax market has been unbelievable this year. Everyone is shocked. We’ve never seen anything like this,” a slackwax producer said. “We have had suppliers go out of business this year, crude spike to the $140/bbl range and then watch in dismay as wax prices spiked higher than ever before.”

The spot price for fully refined p-wax with melt point 125 to 140° Fahrenheit (52-60° Celsius) has increased by 86% since last year to $1,945-2,039/tonne (€1,537-1,611), according to global chemical market intelligence service ICIS pricing. 

Although crude prices began to plummet in September, US p-wax prices held firm. Wax is a by-product of base oils refining.

“In fuels refining, many (products) can turn on a dime as crude goes up and down,” analyst Jamie Brunk of Solomon Associates said in a speech at the annual meeting. “But historically, wax price changes take considerable more time.”

Although players were asked not to discuss specific pricing at the annual meeting, many buyers said they pressed suppliers for any relief on the sidelines.

“It is going to be very difficult for sellers to maintain this artificial high in a declining demand market,” a buyer said.

A buyer said their major supplier hinted that prices would come down before year-end and that the fall would be significant.

“Our supplier has yet to offer us any relief, but told us Asia sets the price and we would see large declines before the year ends,” a buyer said. “We won’t see the same fire-sale prices Asia is seeing, but the general idea is that prices will fall quickly.”

The Asia benchmark fully refined paraffin wax price was assessed this week down by $100/tonne to $1,020-1,060/tonne FOB (free on board) China Main Port (CMP), the lowest level in 14 months.

A supplier would not comment on price trends expected for the rest of the year but did say, “Things will change. They always do.”

A trader warned however that even a dramatic drop in p-wax prices may be short-lived as the industry has not seen the full impact of recently reduced supply.

Wax supplies have been stretched since suppliers Citgo and Marathon announced they would exit the business, taking 20% of wax supply out of the US market.

“Demand is weak enough right now to offset the reduced supply slightly,” the trader said. “But when demand picks up again in 2009 and the supply is not there to meet that demand, prices will react.”

ExxonMobil, IGI and Calumet are among the US paraffin wax producers in the US.

($1 = €0.79)

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By: Heather McGuire Doyle
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