Chemical market trends: Many report price uptrend

13 July 2009 00:00  [Source: ICB]

Crude bounces back from seven-week low. Plant outage in Germany opens opportunities for Asian TDI sellers. European ECH contract sees huge jump

crude oil
Crude prices gained more than $1.30/bbl last Thursday to take August Brent crude above $61.70/bbl, jumping from Wednesday's seven-week low.

This was said to be a correction to Wednesday's settlement of $60.43/bbl, when it lost $2/bbl after larger-than-expected weekly builds in US stocks for distillates and gasoline.

On Thursday morning, August Brent had hit a high of $61.77/bbl, a gain of $1.34/bbl from Wednesday's close, before easing back to around $61.64/bbl. August NYMEX light sweet crude futures traded at $61.11/bbl, having hit a high of $61.25/bbl.

propylene oxide
European propylene oxide (PO) contracts for July have risen by €68/tonne from the month before due to the uptrend in feedstock propylene costs.

The July range is pegged at €1,152-1,239/tonne FD Northwest Europe (NWE).

Producers also pushed through a €68/tonne rise for freely negotiated contracts.

In addition to the feedstock hikes as justification for the price rise, sellers cite tightening supply because of signs of improving demand and propylene limitations.

European epichlorohydrin (ECH) July contracts have climbed by €90-100/tonne, taking prices to €1,190-1,250/tonne FD NWE.

The hike was largely driven by rising upstream costs, with propylene prices hitting €650/tonne in July, while collapsing caustic soda values also led to a surge in prices for co-product chlorine.

One seller points out that spot chlorine prices have almost tripled since Christmas.

Despite the ECH increase, numerous producers admit that they are still making losses and the need for further price rises.

epoxy resins
European epoxy resin contracts for July have been agreed up €50/tonne. This returns prices to April levels and is the first increase seen since July 2008, when liquid epoxy resin (LER) prices peaked at €2,500-2,600/tonne FD NWE.

Standard base LER and solid epoxy resin (SER) are now reported at €1,700-1,780 and €1,800-1,850/tonne, respectively.

Producers had initially been looking for increases of €100/tonne, but adjusted their aims when it became clear that the market was not strong enough to absorb a hike of this scale.

Several sources observe that climbing ECH and bisphenol A (BPA) prices were the main drivers, and that supply and demand were secondary.

toluene di-isocyanate
Asian toluene di-isocyanate (TDI) producers are eyeing the Middle East and African markets. They expect a fall in supply to the two regions after German producer Bayer MaterialScience declared force majeure at its Brunsbuettel plant.

Offer prices to the Middle East and African markets are heard at a minimum of $2,800/tonne CFR for July shipment.

A few key Asian sellers also aim to raise TDI prices for the China and Southeast Asian markets in July, and will divert material to the Middle East and Africa if they fail to achieve their price targets in Asia.

Offers to China and Southeast Asia are at $2,700-2,800/tonne for July shipment, up $100/tonne from June offers.

purified terephthalic acid
The Chinese contract price for purified terephthalic acid (PTA) sold in April has retroactively settled $125-130/tonne above the month before at $850-855/tonne CFR China.

According to ICIS pricing, PTA spot prices rose as high as $930-940/tonne in April on strong demand, although the lowest point of that month was around $820/tonne.

US orthoxylene (OX) contracts have rolled over for July at 39.5 cents/lb FOB USG, according to contract participants.

Buyers and sellers say that a 2-cent drop in the initial July mixed xylenes (MX) at $2.36/gal contract contributed to the steady price of OX. A rollover in European OX contracts and weaker Asian buying interest factored into the US price.

Europe's July phenol contract has risen by €131/tonne from June due to the increase in the July benzene contract.

Phenol settled at a pre-discounted range of €1,150-1,190/tonne FD NWE. Buyers and sellers say that the hefty benzene increase came as a shock.

Brazil's ethanol spot prices continued their uptrend in the week ending July 3, amid firm demand and continued tight supply.

Hydrous ethanol was at reais (R) 0.6941/liter ($1.34/gal), up 7.5% from R0.6456/liter in the week ending June 26.

Anhydrous ethanol was at R0.7799/liter, up 7.8% from R0.7235/liter.

caustic soda
The shutting of key arbitrage opportunities in the West has forced Asia's caustic soda sellers to look for alternative export options within the region. However, options are limited.

Asian spot prices have plunged by over 66% since the start of the year to $130-160/dry metric tonnes in the week ending July 3.

With US buyers snapping up cargoes at four times that price only a year ago, the sharp price decline reflects dismal market conditions, say traders.

Amid the depressed market conditions across Asia-Pacific, only India and Southeast Asia may offer significant export outlets.

Even with crude oil prices dropping, US styrenics sellers predict an L-shaped recovery lasting at least six more months. US styrene demand is low despite tightness that sees most domestic suppliers sold out into mid-August, say producers.

One producer predicts that positive year-on-year demand figures could be seen in the first quarter of 2010 at the earliest, with short-term expectations of sub-$60/bbl crude oil and further struggling unemployment numbers.

Exports to Asia and to Europe - where spot styrene at 49 cents/lb was barely covering production costs - continue to buoy US production, even as local demand remains weak and raw material benzene contracts stand at a nine-month high.

Styrene deals were as high as $1,036/tonne FOB US Gulf last week, making the current price spread between benzene and styrene the tightest since May 2008.

Sellers dismiss expectations that spot styrene will fall from 46-47 cent/lb in the immediate future, citing high costs and steady-if-slow downstream consumption.


By: Andy Brice
+44 20 8652 3214

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