FocusAsia petchems trade buoyant at start of 2010; China hogs limelight

06 January 2010 05:41  [Source: ICIS news]

By Pearl Bantillo and Dolly Wu

SINGAPORE (ICIS news)--Brisk trade characterized the first few days of 2010 for the Asian petrochemical market, with China again leading the charge on demand, industry sources said on Wednesday.

China, the largest importer of petrochemicals in Asia, was reliving its role in 2009 as the single biggest driver of product prices in the region as it started to stock up on supplies ahead of its Lunar New Year holidays in February, they said.

“The whole chemical industry will be much better in 2010 than how it was last year,” said Arden Dai, a Shanghai-based petrochemical analyst with consultancy firm Frost and Sullivan.

This time around, Dai said, end-user demand would back up petrochemical production since the global economy was on a recovery path.

Last year, some production activities in China were artificially pushed, purely on the strength of its government’s massive fiscal stimulus program put in place to cushion the economy from the global recession.

Most market players, however, do not expect product price gains this year to mirror the surge in 2009.

The rise in crude values – a welcome sign of economic recovery to a certain extent – also provided additional impetus for petrochemical prices to stay strong or move up, said Dai of Frost and Sullivan.

“All market players are optimistic for the chemical industry this year. Most international and domestic producers or traders are active in purchasing feedstock,” he added.

Crude values were hovering at above $80/bbl (€55.2/tonne) on Wednesday, after spiking above $81/bbl on the first trading day of this year, buoyed up by strong demand for heating oil in the US and Europe due to an unusually cold weather.

Naphtha, meanwhile, was trading above $750/tonne CFR (cost and freight) Japan.

“Firm upstream cost is driving the aromatics market, alongside with good market sentiment,” a trader based in South Korea said.

Benzene started trading on a firm footing on Monday but slightly weakened on Wednesday, as crude values gave up some of its gains following an unexpected increase in US distillate stocks.

At noon, buy-sell indications for March shipments slipped $15-25/tonne to $1,080-1,105/tonne FOB (free on board) Korea from Tuesday's close.

Toluene was stable, with bids and offers ranging between $950-960/tonne FOB Korea.

Sentiment was more positive further downstream, which was also helping drive up the naphtha market, market sources said.

Ethylene prices were expected to stay at 15-month highs in the first quarter of the year, supported by tight supply in Asia and the Middle East, according to olefins traders.

“I do think January-February [values] will be around these levels, maybe a little more,” said a Singapore-based trader.

The same fundamentals were driving up butadiene (BD) spot prices, which soared to $1,800-1,850/tonne CFR (cost and freight) northeast (NE) Asia this week, up nearly $400/tonne from early December.

BD is the feedstock for synthetic rubber production.

Under increasing pressure from soaring BD prices, Asian synthetic rubber producers have imposed significant price hikes of $100-300/tonne for January spot shipments.

January spot offers for non-oil grade 1502 SBR rose $100-200/tonne to $2,100-2,200/tonne CFR Asia while butadiene rubber (BR) prices were hiked to $2,300/tonne CFR Asia, up $300/tonne from previous December settlements.

“We have no choice but to increase our January spot offers for SBR and BR or our margins will be wiped out,” a Chinese SBR producer said.

Meanwhile, styrene monomer prices in Asia remained on an uptrend given tight availability of January and February parcels against recovering demand.

Spot prices rose to $1,340/tonne CFR China in early January, up $60/tonne from end December levels of around $1,280/tonne CFR China.

Similarly, monoethylene glycol (MEG) and purified terephthalic acid (PTA) prices went up sharply on the first two days of 2010. MEG values shot up by $75-80/tonne or 9% to $975-980/tonne CFR CMP (China main port) on Tuesday and Wednesday compared with 31 December 2009.

Meanwhile, PTA prices surged to $960-970/tonne CFR CMP these days, $35/tonne higher than 31 December 2009.

The hikes in the PTA and MEG markets were initially caused by a spike in the PTA futures contracts on the Zhengzhou Commodity Exchange, which then attracted robust speculative trading in the following days. A prompt demand from a major Japanese MEG trader had also helped push up the prices, sources said.

($1 = €0.69)

With additional reporting by Helen Yan, Ong Sheau Ling, Peh Soo Hwee, Clive Ong and Becky Zhang

Read John Richardson and Malini Hariharan's Asian Chemical Connections blog
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By: Pearl Bantillo
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