Chemical market trends: Some feeling the pressure

25 May 2009 00:00  [Source: ICB]

buyers show consternation over possible BD hikes, Asian styrenics markets react to demand uncertainty, while Argentinian caustic soda prices flounder

crude oil
Crude prices rose by more than $1.00/bbl on Tuesday, pushing US futures back above $60/bbl, amid growing supply concerns following actions by militants in Nigeria and a fire at a major US refinery.

In the morning, June NYMEX light sweet crude futures were trading at $60.12/bbl, up by $1.09/bbl from Monday's close. Earlier on Tuesday morning, the contract hit $60.48/bbl - the highest intra-day trade since November 2008.

Also on Tuesday, July Brent was trading at $59.39/bbl, up by 92 cents/bbl from Monday's close. Earlier, it had risen as high as $59.65/bbl.

Crude had closed at six-month highs last Monday, as worries built over disruptions to supplies in Nigeria and an explosion and fire at the 178,000 bbl/day Marcus Hook refinery in the US.

acetone methyl methacrylate
May European acetone methyl methacrylate (MMA) contracts have settled up by €25-30/tonne because of higher propylene costs.

The first gross, or prediscounted, contract price was agreed on April 30 at €560/tonne FD NWE, marking a €30/tonne increase from the month before.

The buyer involved said: "The market is nervous about Asia, and there is a real concern about not getting hold of acetone. Propylene also went up €23/tonne."

An initial acetone MMA net contract was confirmed on May 7, with an increase of €25/tonne, taking it to €460/tonne.

butadiene
US butadiene (BD) buyers last Tuesday expressed dismay over a producer seeking a 7 cent/lb hike in June, saying that the initiative was excessive and could destroy demand downstream. The proposed increase would put contracts at 34 cents/lb FOB next month. Contracts settled at 27 cents/lb in May, up by 2 cents/lb from April.

Sentiment among buyers was that neither supply and demand nor the latest jump in energy costs could justify the proposed increase.

"BD is now being offered at 23 cents/lb in the spot market," says one buyer.

bisphenol a
European bisphenol A (BPA) contracts for May have settled at €900-1,000/tonne, up by €50/tonne from the previous month.

An increase had been expected after the gains made by benzene in April.

One buyer conceded that the recent jump in feedstock values had seen price ideas in May move up to the mid-€900s/tonne, and expected that BPA values would climb further in June.

There is a suggestion that supply is beginning to tighten, owing to production cutbacks and significant exporting to the healthier Asian market this month.

With demand from downstream sectors currently strong in Asia and supply short due to operating cutbacks in the region, there have also been fewer imported cargoes from the region for sale in Europe.

nylon 6
European nylon 6 virgin polymer contracts in May have increased by €0.10/kg at the top end from April due to rising feedstock costs.

Prices settled at €1.20-1.40/kg FD Northwest Europe (NWE), depending on viscosity and the producer. Some producers say they are convinced that feedstock prices would continue to rise throughout June. Feedstock caprolactam (capro) rose by €80-90/tonne in April to settle at €1,422-1,473/tonne, while adipic acid rose by €30/tonne to reach €1,120-1,190/tonne.

paraxylene
Japanese producers Nippon Oil and Idemitsu Kosan have proposed a $130-140/tonne hike for June paraxylene (PX) prices.

"The [current] situation is still tight supply, and demand remains okay," says a source from Idemitsu, which nominated an Asian contract price of $1,140/tonne CFR Asia.

Nippon Oil's June price was $1,130/tonne.

Two major customers in Taiwan say the proposals from May's $1,000/tonne are within expectations, as spot prices remain pegged at around $1,120/tonne CFR Taiwan. US major ExxonMobil had already proposed selling June PX at $1,160/tonne CFR Asia.

styrenics
Asian polystyrene (PS) and acrylonitrile-butadiene-styrene (ABS) prices are down as uncertain demand plagues the market, say traders. Spot values in Hong Kong slipped by $30-50/tonne week on week as traders and distributors liquidated cargoes.

General purpose PS prices are around $950/tonne CFR Hong Kong, while high impact polystyrene (HIPS) is hovering at $1,050/tonne. ABS values slipped to the low-$1,300s/tonne.

Demand has failed to pick up significantly since the Labor Day holidays in early May, weighing on selling sentiment.

Traders believe that prices could trend lower in the near term, as there remain ample inventories, although the availability of resins could be reduced by mid-June.

styrene butadiene rubber
Domestic styrene butadiene rubber (SBR) prices in China may be under pressure to fall further with the start-up of Qilu Petrochemical's new 100,000 tonne/year SBR plant on May 23.

SBR non-oil grade 1502 prices have tumbled by more than yuan (CNY) 1,500/tonne ($219/tonne) in the past month to CNY11,200-11,600/tonne ex-warehouse.

Concerns over whether Chinese demand for SBR is sustainable in the third quarter have also dampened sentiment.

caustic soda
Weak demand has driven caustic soda prices in Argentina lower on an almost daily basis, says a local producer.

Domestic prices have dropped to $350-450/dry metric tonne ex-tank as producers push to reduce inventories in a market flooded with low-priced imports.

Sources say that the region's alumina and pulp-and-paper industries - which are both major consumers of caustic soda - have sharply reduced production since the start of the year because of the global economic downturn.

ETHYLENE AND PROPYLENE DISCUSSIONS UNDERWAY
June ethylene and propylene contract talks have started in Europe, with hikes expected. These range between increases of €10-60/tonne and €25-60/tonne, respectively. May ethylene was €685/tonne FD Northwest Europe (NWE), with propylene at €520/tonne.

"Naphtha is roughly €25-28/tonne higher than when the May contracts settled," says a producer, adding that "we need to re-establish the equilibrium so we producers don't lose money."

One ethylene consumer counters: "There is pressure from rising feedstocks, but on the other hand, demand is still poor." It expects a moderate increase, similar to May.

Another says an increase would be accepted, but only on a cost basis. It adds that "a rollover would be a solution," having heard that demand could dip in June and come down dramatically in July and August.

However, a rollover is deemed unrealistic given crude and naphtha rallies. By mid-week, naphtha was about $500/tonne CIF NWE, from $464-470/tonne a week earlier.

May European acetone methyl methacrylate (MMA) contracts have settled up by €25-30/tonne because of higher propylene costs.

The first gross, or prediscounted, contract price was agreed on April 30 at €560/tonne FD NWE, marking a €30/tonne increase from the month before.

The buyer involved said: "The market is nervous about Asia, and there is a real concern about not getting hold of acetone. Propylene also went up €23/tonne."

An initial acetone MMA net contract was confirmed on May 7, with an increase of €25/tonne, taking it to €460/tonne.


By: Andy Brice
+44 20 8652 3214



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