Chemical market trends: Spot and contract increases

03 December 2009 00:01  [Source: ICB]

Hefty hikes for spot ACN in Europe, and Chinese ECH offers rise. Benzene contracts climb in Europe and the US. Asian Contract Price for PX soars by 10%

More parties involved in European ethylene and propylene contract talks have accepted the December settlements - at €840 and €750/tonne, respectively. Ethylene rose by €7/tonne, and propylene by €10/tonne because of firmer feedstock values.

However, in the week ending November 27, some key contract buyers and sellers were yet to officially accept the numbers because they did not match their expectations. Several consumers were targeting an ethylene rollover, despite end-use markets suffering from poor demand and cheap imports. Similarly, some propylene sellers were eyeing more than €10/tonne, adding that margins are poor and supply is tight.

Contract participants had anticipated a fairly tough round of negotiations, given higher naphtha values and the fact that December was usually a short demand month, complicated by year-end working capital considerations.

Propylene spot levels are currently around contract value at €720-740/tonne CIF Northwest Europe (NWE). Spot pipeline ethylene is pegged around €700/tonne FD.

European fourth quarter (Q4) vinyl acetate monomer (VAM) contracts have emerged €40-50/tonne higher than the previous quarter's settlement, owing to supply constraints and the need to recover margins. Contracts were agreed at €660-750/tonne FD Northwest Europe (NWE).

Producers had posted an increase of €100/tonne on the basis that feedstock increases from ethylene in Q3 had still not been recovered, as well as supply restrictions for VAM in September.

There were some increases of €60-70/tonne confirmed, but figures up to €100/tonne lacked confirmation from the buy side, despite insistence from a few sellers.

US ethylene oxide (EO) formula-based prices for November are expected to increase by 2-2.5 cents/lb, following an increase in feedstock ethylene costs. October EO is at 48-55 cents/lb FOB for large-volume buyers.

Formula-based EO prices typically lag behind ethylene settlements by a month. October ethylene contracts climbed by 2.75 cents/lb.

December EO numbers could climb further if the November ethylene contract moves up 3-5 cents/lb above October's settlement of 37.25 cents/lb.

Spot prices for European acrylonitrile (ACN) have risen by $100/tonne, reflecting a significant tightening of supply.

The complete withdrawal of one major European producer from the spot market because of production issues, higher Asian spot values and strong demand in the fibers sector have contributed to the higher prices.

Spot material is pegged at $1,580-1,600/tonne CIF Western Europe (WE). One trader reports multiple deals to the Mediterranean at these levels, involving substantial tonnage.

Major Chinese epichlorohydrin (ECH) producers raised their spot offers by yuan (CNY) 1,000/tonne ($146/tonne) last Monday from the week before because of tight supply and high propylene costs.

Offers from major producers Shandong Haili Chemical, Xinyue Chemical and Yangnong Chemical were pegged at CNY12,500/tonne DEL east China.

Baling Petrochemical quoted offers at CNY13,000/tonne.

ECH prices had been reported at CNY11,300-11,700/tonne on November 27.

Producers are largely upbeat over the pricing outlook, citing tight supply because of plant turnarounds and production cuts, say traders.

Buyers, however, are skeptical over the sustainability of the uptrend, with demand weak from the downstream epoxy resins sector, add the traders.

December's European benzene contract has settled up €23/tonne at €570/tonne, in line with higher spot numbers caused by ongoing export opportunities. This settlement is equivalent to $850/tonne FOB NWE.

Spot benzene prices had remained strong throughout November, as production issues in Asia had tightened the market, creating opportunities for European sellers to export to both the US and Asia. Last Tuesday morning, December deals traded $28-30/tonne above the contract price, at $878-880/tonne CIF Amsterdam-Rotterdam-Antwerp, as upstream crude and naphtha values gained momentum after an ease in the Dubai crisis, stock market gains and a weaker US dollar.

The November contract was agreed at $809/tonne or €547/tonne, based on the officially agreed exchange rate at the time.

In the US, meanwhile, benzene contracts for December settled at $2.98/gal, up by13 cents/gal from November.

December spot benzene was talked at $2.93-3.00/gal FOB US Gulf last Monday.

Mixed xylenes (MX) contracts for December have been agreed up by 10 cents/gal in the US at $2.63/gal - a 4% hike from November's benchmark at $2.53/gal FOB US Gulf.

MX consumers say the climbing prices are driven by bullish sentiment in China, where a new round of government stimulus is expected to drive demand for polyester intermediates.

Spot MX activity is currently muted, with offers heard at $2.70/gal and bids in the $2.60s/gal.

The December paraxylene (PX) Asian Contract Price (ACP) has jumped by $100/tonne CFR Asia - or 10.4% - above the November settlement to $1,060/tonne.

Market players attribute the firmer prices to strong energy values and bullish sentiment in the downstream purified terephthalic acid (PTA) sector.

Early last month, petrochemical majors Nippon Oil, Idemitsu Kosan, both Japanese and the US's ExxonMobil nominated the December PX ACP at $1,120/tonne, up by $160/tonne from November.

Major Asian melamine producers have settled their Q4 contracts at $1,250-1,300/tonne CFR Asia - marking a $50/tonne hike.

"[The] melamine market showed signs of recovery coming into the last quarter of the year, especially after the Chinese market returned from the National Day holidays," says one major producer.

Contract negotiations for the first quarter of 2010 are yet to get under way.

By: Andy Brice
+44 20 8652 3214

AddThis Social Bookmark Button

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.

Printer Friendly