Chemical market trends and data: Snug supply supports hikes

07 September 2009 00:00  [Source: ICB]

Tighter availability pushes up European methylene chloride and US ethylene glycol values, while aromatics prices in the US and Europe drop

US ethylene glycol (EG) producers are still pushing for 5-6 cent/lb price hikes that were due to take effect last Tuesday.

One reseller points out that the growing supply/demand imbalance is providing some price support.

One of US-based Dow Chemical's ethylene oxide (EO)/EG units at St. Charles Operations in Taft, Louisiana, is being converted to EO-only production, taking some EG off the market.

A second unit at the facility was idled in March, and will be taken down permanently when the conversion of the first unit is complete.

Another EG unit, this one run by Formosa Plastics, is also down for a maintenance turnaround.

US exports to Europe have contributed to the tightness as exporters had anticipated supply from new plants in the Middle East that were delayed, addsa trader.

Supply is stretched but demand is rising due to an increase in antifreeze buying ahead of the winter months.

Methylene chloride prices in Europe's export spot market have risen because of strong demand and tight supply.

Prices climbed by as much as $20/tonne within a week, to $520-570/tonne FOB Northwest Europe (NWE) which represents a steady recovery from the lows of $390/tonne seen in May.

"We have actually managed to get plus $50/tonne on August prices on large export shipments," says one producer.

Producers cite narrow margins due to high feedstock costs, and so they are look-ing for increases of €80/tonne from August to September.

Buyer resistance and lengthy supply has so far prevented such a hefty hike.

After speculation over a rare split settlement, September US butadiene (BD) contracts have been agreed up by 5 cents/lb at 65 cents/lb.

Contracts typically settle at the lowest price put forward by the four main producers. However, a wide 13 cent/lb spread in nominations saw talk of a split settlement.

Anglo-Dutch major Shell nominated an increase of 5 cents/lb, Texas Petrochemicals wanted 6 cents/lb, while US major ExxonMobil nominated a 15 cent/lb hike. Netherlands-based LyondellBasell Industries nominated 18 cents/lb. Buyers decried the 15 and 18 cent/lb proposals as too high.

Europe's September benzene contract has been confirmed down by €168/tonne from August at €576/tonne - equivalent to $828/tonne FOB NWE.

The lower contract, down by more than 20% from August, had been widely anticipated after the spot market saw significantly lower numbers throughout the month.

The lowest deal was on August 26 at $770/tonne CIF ARA (Amsterdam, Rotterdam, Antwerp), $275/tonne below the contract.

US September benzene contracts have fallen by 24% to $2.79/gal. This is down 86 cents from August's $3.65/gal - a 10-month high - and is the first month-on-month decrease since March 2009. A lower contract had been expected as September spot values fell by nearly a dollar to $2.67-2.75/gal DDP (delivery, duty paid) in late August.

Japanese aromatics major Nippon Oil, meanwhile, settled its Asian Contract Price at $800/tonne CFR Asia.

The US mixed xylenes (MX) contract has settled at $2.34/gal FOB US Gulf for September, marking a 20-cent drop on August's figure.

The decline in upstream gasoline prices with the US summer driving season coming to an end sent spot MX in the US Gulf down to around $2.30-2.40/gal.

Chinese major Sinopec has proposed selling purified terephthalic acid (PTA) for September delivery in the domestic market at yuan (CNY) 8,000/tonne delivered, CNY200/tonne lower than the August price.

Some of Sinopec's customers expressed surprise over the move, as other leading producers, including Xiang Lu Petrochemical and Yisheng Petrochemical, had already proposed CNY7,900/tonne.

European polyethylene terephthalate (PET) contracts rose by an average of €30/tonne in August and could climb again in September.

Prices delivered to West Europe in August were as much as €980/tonne, matching some of the lower values seen in Spain during July.

Spanish accounts still face around €1,000/tonne in some cases, but €955/tonne FD has also been heard. Producers are targeting increases of €50-100/tonne for September.

A spike in China's titanium dioxide (TiO2) imports - which reached a record high in July - is likely to be short-lived with domestic production set for recovery.

The import volume of TiO2 in July totaled 30,532 tonnes, according to China Customs. This was the highest volume in a month, since record-keeping began, in 1995.

The import surge is attributed to an urgent need for restocking among users.

The country only imported 100,281 tonnes of TiO2 in the first six months of the year, which was the lowest for any corresponding period since 2003.

July is traditionally among the peak months for TiO2 consumption in China, which stoked demand.



Demand for US styrene butadiene rubber (SBR) is set to stay low until the end of the year, making it tough to push through price hikes resulting from higher production costs.

This year's overall drop in tire shipments compared with 2008 has been adjusted up to 16% from 7% by the Rubber Manufacturers Association (RMA).

Motorists are driving less, to conserve fuel, after record oil and gasoline prices last summer, resulting in a weaker replacement tire market - the primary demand-driver for SBR. Replacement tire sales for the remainder of the year are expected to be 9% down for cars and 18% down for light trucks, according to the RMA.

New vehicle sales have also plummeted. Original equipment manufacturer demand for passenger car tires is projected to be about 45% lower in 2009.

Feedstock butadiene (BD) prices have nearly doubled from June (31 cents/lb) to August (60 cents/lb). SBR contracts for August were 82-87 cents/lb FOB US Gulf for 1502 non-oil grade, and 74-79 cents/lb for oil extended grade.

By: Elaine Burridge
+44 20 8652 3214

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