Chemical market trends: Prices spiral downward

17 November 2008 00:00  [Source: ICB]

Markets see further price declines. Crude suffers from slowing demand, US MX contracts react to softer spot values, while European phenol sees its largest drop on record

pta numbers slump to five-year low in asia

Asian spot purified terephthalic acid (PTA) prices have slipped to their lowest levels in more than five years because of an extremely weak downstream polyester market.

Current PTA prices are reported at $540-550/tonne CFR China, a range not seen since July 2003, and a sharp decline from this year's peak - a 12-year record - of $1,230/tonne.

Offers were as low as $540/tonne by the close of business last Tuesday, with players wondering when prices would bottom out. With supply increasing due to the restart of Chinese firm Hualian Sunshine Petrochemical's lines and the gradual increase in operating rates among PTA makers, some participants suggest that an oversupplied market will mean further price erosion.

Meanwhile, after months of deliberation, European PTA contracts are finally settling up €90/tonne for July and down €70/tonne for August. The prices reported echo the paraxylene (PX) changes.

July values for European origin PTA climbed by around €90/tonne to €990-1,017/tonne FD northwest Europe (NWE), with August dropping €70/tonne to €920-947/tonne. A few customers and manufacturers remain at loggerheads and are therefore operating with provisional numbers.

crude oil

Crude prices fell by more than $1/bbl last Wednesday, pushing front month NYMEX light sweet crude futures below $58/bbl - an 18-month low - amid concerns over the global economic crisis and slowing demand.

Last Wednesday morning, December NYMEX futures were trading at $58.27/bbl, down $1.06/bbl on Tuesday's settlement level, having previously fallen to a low of $57.70/bbl. Meanwhile, December Brent on London's ICE futures traded at $54.90/bbl, down 81 cents/bbl from Tuesday, having fallen to $54.28/bbl.

The combination of Wednesday's price fall and a 5% price decline the previous day pushed NYMEX crude futures to their lowest value since last March and ICE Brent futures to a level last seen in January 2007.

polyolefins

The global polyethylene (PE) and polypropylene (PP) industry faces daunting challenges in 2009.

New resin capacities are coming on stream at a time when demand could slump, as the global economy slows, according to Asian traders and producers.

More than 2m tonnes of new PE and around 1.6m tonnes of PP capacity are scheduled to start up in China next year, while the Middle East will see some 5.4m and 3.6m tonnes of PE and PP starting up, respectively.

Global PP and PE prices have fallen sharply since the worldwide financial crisis unfolded at the end of September, as many plastics processors cut operating rates in expectation of weaker demand. Some industry analysts suggest that the plastics sector has not yet seen the worst of it.

polyvinyl chloride

October US polyvinyl chloride (PVC) contracts have been agreed down 5 cents/lb, because of lower ethylene feedstock costs.

This takes PVC values to 69-71 cents/lb for general purpose grade resin and 65-67 cents/lb for pipe grade material.

monoethylene glycol

Saudi monoethylene glycol (MEG) producer SABIC has lowered its December nominated Asian contract price (ACP) by $290/tonne to $610/tonne CFR Asia.

A SABIC source declined to provide a reason for the ACP reduction.

Fellow MEG producers MEGlobal and global oil major Shell have not nominated a selling idea for December.

For November, SABIC's ACP was pegged at $900/tonne.

acrylonitrile

US acrylonitrile (ACN) sellers have been cutting output as prices in the week ending November 7 fell to four-year lows.

INEOS, the largest US ACN producer, said the prolonged slowdown in sales forced it to cut its production rates to 50% from 60% set in July. It operates a 460,000 tonne/year plant in Green Lake, Texas, and a 200,000 tonne/year plant in Lima, Ohio.

Cytec Industries, which operates a 227,250 tonne/year plant in Fortier, Louisiana, said it was running at 60%, down from the 70% rate it set in the third quarter.

Meanwhile, sources said buyers were clamouring for a large price drop as November propylene contracts initially settled down 30 cents/lb at 28.5 cents/lb.

Buyers' price ideas were heard at $1,200/tonne FOB USG, down 35% from bids and offers of $1,780-1,900/tonne the week before.

mixed xylenes

US mixed xylenes (MX) contracts for November have been settled by two producers at $1.78/gal, down 72 cents/gal. This follows a steep fall in spot prices that showed signs of bottoming out a fortnight ago.

In the week ending November 7, spot MX was at $1.74-1.85/gal. This was down from $2.40-2.60/gal four weeks earlier.

recycled pet

European recycled polyethylene terephthalate (RPET) flake prices face downward pressure in November, due to increasing competition from its virgin counterpart.

One recycler says there needs to be at least a 10-15% price difference between clear flakes and virgin PET, otherwise customers opt for the virgin material.

PET contracts fell a total of €160/tonne in September and October, and the RPET market has struggled to keep pace.

Spot virgin PET is being delivered into Europe in the €900s/tonne FD northwest Europe (NWE) and this is pushing recycled levels down, notes a source.

The RPET clear flake prices are at €780-850/tonne for November, down €30-35/tonne from October. Mixed colored flakes also fell by €30/tonne at the upper end of the range to €540-620/tonne.

orthoxylene

November's orthoxylene (OX) contracts have settled down €190/tonne in Europe at €600/tonne FD NWE.

One phthalic anhydride (PA) buyer dubbed the move as "good news for the end consumer," adding that it hoped the drop of almost 25% would stimulate demand from the end markets in the plasticizer industry.

Buyers and sellers had anticipated a big fall, especially since demand from the PA sector has softened over the past few weeks.

phenol

The November phenol contract in Europe has experienced its largest price drop on record.

The €481/tonne decline from October matches that of benzene, which fell to €316/tonne FOB NWE on October 31.

Sources confirmed the hefty decline for freely negotiated and formula-related phenol contracts, taking the prediscounted range to €790-830/tonne FD NWE.


By: Andy Brice
+44 20 8652 3214



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