Chemical market trends: Mixed demand for markets

31 August 2009 00:00  [Source: ICB]

Players report varied consumption. US PVC sellers eye hikes despite soft demand. Contract talks continue, while Tampa ammonia climbs by 25%

ETHYLENE
Weak demand for ethylene in China has paralyzed trading activity in Northeast (NE) Asia, and cargoes have started heading to the southeastern part of the region, where the material currently commands better prices.

Selling ideas are pegged at up to $1,020-1,030/tonne CFR NE Asia for cargoes arriving in September, while buying ideas hover in the low to mid-$900s/tonne.

Poor consumption from China - Asia's largest importer of ethylene - has left the Northeast Asian market without direction over the past few weeks.

POLYVINYL CHLORIDE
Producers are nominating price hikes for US polyvinyl chloride (PVC), defying soft demand as they attempt to pass through higher feedstock costs, according to buyers.

"With all the increases in July and August, buyers are going to balk at anything more. There just isn't much strength in demand, and we can't pass on the increases," says a buyer.

PVC producers were largely successful in pushing through increases of 3 cents/lb for July business, and they have another 3 cent/lb increase in August negotiations.

At least one large supplier has confirmed its intention to seek a 2 cent/lb hike from September, although other producers have yet to confirm September nominations.

Suppliers have largely based support for the increases on the tightness of feedstock vinyl chloride monomer (VCM) and higher chlorine prices. PVC contracts were at 58.5-60.5 cents/lb for pipe grade, and 62.5-64.5 cents/lb for general purpose for July.

BUTADIENE
Europe's butadiene (BD) September monthly contract price has settled at €830/tonne FD, up €90/tonne from August due to tight supply and high spot prices.

The producer involved says that the market is still tight and spot values are rising in all markets.

The current tightness is blamed on increased cracking of light feedstocks propane and butane during the summer - which produces less BD than naphtha cracking does.

The US market has become even more stretched by plant outages.

Spot prices are currently quoted at $1,250-1,500/tonne FOB Rotterdam, up by $50-250/tonne from early August.

BENZENE
European benzene values have continued their downtrend, with selling interest strong and the market long. This may result in a significant decrease for the September contract price, say some market sources.

September benzene deals were done last Wednesday at $770-790/tonne CIF Amsterdam, Rotterdam, Antwerp (ARA).

This represents a decrease of $255-275/tonne from the August $1,045/tonne contract - equivalent to €744/tonne at the time of the settlement.

Benzene prices started falling in the middle of August, after the arbitrage tothe US closed and the domestic marketgrew longer.

PARAXYLENE
Chinese petrochemical major Sinopec has finalized its price for August paraxylene (PX) yuan (CNY) 700/tonne higher than the previous month due to strong demand.

The company says that the price of CNY8,800/tonne DEL reflects the current market conditions with demand having outstripped supply for most of August.

Sinopec's July price was CNY8,100/tonne.

STYRENE ACRYLONITRILE
European styrene acrylonitrile (SAN) August contracts have been settled €50-60/tonne above July due to higher feedstock values. The hikes are attributed to higher styrene and acrylonitrile values. Producers continue to bemoan horrendous margins.

One buyer points out that lower demand has made it difficult for manufacturers to achieve their original targets of €90/tonne or above.

Compounding grade SAN is at €1,360-1,410/tonne FD (NWE) Northwest Europe, commercial grade at €1,510-1,650/tonne and specialty grades at €1,700-2,500/tonne.

Market participants say they expect further SAN price pushes in September. "ACN values are firming, so we have to pass those on," says one producer.

A buyer, however, says it is unsure: "Styrene should soften, which would cancel out any ACN strengthening."

BUTANEDIOL
The North American butanediol (BDO) contract price for the third quarter has settled at 90-110 cents/lb, marking an increase of up to 3 cents/lb from the previous quarter's range.

The upturn was largely expected because of ongoing pressure on operating costs from higher feedstock numbers.

Several producers had already announced their intention to push prices up by 3 cents/lb due to unsatisfactory margins.

However, mixed ideas surrounding demand and the volatility of crude prices saw some contracts roll over.

AMMONIA
The contract price of benchmark US Tampa ammonia for all September shipments has risen by 25% from the month before. This takes prices to $325/tonne CFR.

September's settlement represents a $65/tonne increase from the $260/tonne August price, and is nearly double the $180/tonne figure reported for July.

Supplies of ammonia in the US Gulf were said to be tight in August, and some fertili-zer companies turned to imports to meet their requirements.

ACETONE
A major US methyl methacrylate (MMA) acetone buyer has settled an August contract for 47.25 cents/lb with one of its suppliers.

The settlement falls between two previous initial settlements involving two other sets of buyers and sellers. The first was reported at 48.5 cents/lb and the second at 46 cents/lb.

July contracts settled at 42.75 cents/lb. The unusually scattered results have stirred debate over what should be considered as the industry-wide settlement, which remains unresolved.

ASIAN PX DIPS ON AILING DOWNSTREAM DEMAND
Asian paraxylene (PX) spot numbers have eased over the past few weeks, with PX producers struggling to generate margins because of waning demand from the downstream polyester market.

This weakness, which may extend through to September, has also been exerting pressure on prices of isomer-grade xylene upstream.

The price spread between the two aromatics had fallen to $185/tonne last Wednesday, $15/tonne below the threshold of $200/tonne that PX producers need to cover their operating costs. PX producers had enjoyed a profit margin of around $270/tonne in May but this has significantly declined to $20/tonne in August.

Spot PX had fallen by about 9% to $1,045-1,055/tonne CFR (cost and freight) Taiwan on Wednesday from the range reported on August 6.

Isomer-grade xylene values, meanwhile, were largely stable at $850-880/tonne CFR Northeast Asia mid-week, compared with $850-870/tonne three weeks ago.

By: Andy Brice
+44 20 8652 3214

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