EPCA '09: Europe aromatics players bearish about rest of 2009

04 October 2009 10:00  [Source: ICIS news]

By Madelon Ten Cate and Truong Mellor

BERLIN (ICIS news)--European aromatics players will be focusing on volatile crude levels, expected run rates and lower downstream demand into the fourth quarter at the 43rd annual European Petrochemical Association (EPCA) meeting in Berlin.

With the US still leading European and Asian movements, participants said they were keeping a close eye on developments on the other side of the Atlantic too.

Spot values for all products were expected to go down towards the end of the year.

Benzene values had been on a downtrend since early August, when a longer market and an end to export opportunities to the US led to falling prices.

Benzene players agreed that sentiment towards the end of the year continued to be bearish, with numbers likely to continue on a downward trend into the fourth quarter. This is traditionally the case due to the destocking processes that take place ahead of the holiday season in December.

“If energy values stay where they are today, benzene will hover around the $700s/tonne CIF (cost, insurance and freight) ARA (Amsterdam, Rotterdam, Antwerp) for the rest of the year,” one buyer said.

A trader said: “Low stock levels could still lead to a short-term spike for prompt material in October or November,” adding that, fundamentally, there was not enough demand in downstream chains for benzene prices to move above the $800s/tonne.

It appeared, therefore, that benzene values had reached their 2009 peak earlier in the year, when spot deals were done as high as $1,100/tonne for August.

Indeed, October had just seen the second contractual fall of the year, when players agreed to a price of €505/tonne or $734/tonne FOB (free on board) NWE (northwest Europe). This was a drop of €71/tonne from September, reportedly caused by a longer market, lower-than-expected numbers in the US and overall ongoing weak downstream demand.

In other parts of the aromatics market, some players were quite pleased with falling benzene numbers.

Throughout the year, styrene producers’ margins had been a hot topic of debate, as styrene values failed to track upstream movements in some cases.

“Those are two completely different markets,” a styrene buyer said. “Styrene values are driven by demand and prices in other regions, and only partly by upstream costs.”

Despite volatile movements in the benzene market, styrene spot values have been quite stable in the past few months, just above the $1,100s/tonne FOB Rotterdam, a buyer said. Nevertheless, for the past two months contracts saw a decline in line with upstream values.

The October barge contract was agreed at €829/tonne FD (free delivered) NWE, which was a drop of €45/tonne from September. Sources said this was a compromise between lower upstream costs and a strong spot market.

Falling benzene numbers since August also had an adverse effect on the toluene market moving into the fourth quarter. Reduced cracker run rates led to a tightening of availability in September, but there was less buying interest seen following a quiet summer period.

The October toluene contract was confirmed at $728-735/tonne FOB NWE, a decrease of $45-47/tonne.

“Supply is still limited because refinery operating rates are still down, but there has been a dearth of spot business,” said one of the suppliers involved.

Xylene prices also faced strong downward pressure following the summer. The slump in Asian paraxylene (PX) values in light of weak downstream demand saw price indications for October and the rest of 2009 come off in Europe, something that has been compounded by several new capacities coming on stream in China and throughout the region.

Softer energy values and a clear lack of spot demand also brought down buy/sell ideas for mixed xylenes and orthoxylene (OX). In the case of OX, the shutdown of a BASF downstream phthalic anhydride (PA) line in Ludwigshafen, Germany, furthermore severely curtailed buying interest.

An initial European OX contract price for October was agreed at €615/tonne FOB NWE, down €45/tonne from the previous month due to low demand.

An initial October settlement for paraxylene (PX) was heard at €615/tonne FOB NWE as well, down €145/tonne, largely due to the continued slump in the Asian PX market.

Suppliers had proposed a price of €660/tonne, down €100/tonne from the previous month, but this was widely rejected. According to one source, buyers were looking for a decrease of €150-160/tonne on the back of falling Asian prices and weak domestic spot demand.

“It is completely confirmed,” said the buyer involved. “€615/tonne makes Europe pretty competitive.”

Several players speculated that rates across the entire xylene sector would come down further in the fourth quarter to prevent oversupply.

The EPCA meeting in Berlin runs from Sunday 4 October until Tuesday 6 October 2009.

For more on aromatics visit ICIS chemical intelligence
To discuss issues facing the chemical industry go to ICIS connect

By: Madelon Ten Cate
+44 20 8652 3214

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