Chemical market trends and data: Many see price increases

11 January 2010 00:00  [Source: ICB]

Players report price hikes in many markets. Crude climbs, thanks to cold spell, Asian SBR leaps because of feedstock costs, while European benzene is up

NYMEX light sweet crude for February delivery settled at $81.51/bbl last Monday, in response to a cold weather-inspired rally on heating oil. This marked a $2.15/bbl increase from the previous Friday's close.

The energy markets also responded to a weaker dollar and a stock market rally because of improved confidence in the global economic recovery.

February crude settled higher for the eighth consecutive session, topping out at $81.68/bbl before retreating.

ICE Brent for February delivery, meanwhile, climbed to $80.35/bbl before settling at $80.12/bbl, an increase of $2.19/bbl.

Firmer ethylene vinyl acetate (EVA) prices in Asia will be supported this year by recovering demand from downstream footwear and packaging film sectors, and a lack of new capacity.

Higher demand for packaging material for commodities such as rice, sugar and fertilizers will boost EVA consumption, say buyers.

For EVA with 18% vinyl acetate (VA) content, prices could break the $2,000/tonne CFR China/Southeast (SE) Asia barrier for the first time since mid-September 2008, according to a Taiwan-based producer.

Fresh offers for 18% VA content EVA from Taiwan are pegged at $1,830-1,835/tonne CFR for February lifting, reflecting a hefty increase of $120-125/tonne over January fixtures for SE Asian material.

Small 1,000-2,000 tonne parcels were booked at $1,830/tonne, while South Asia markets have attracted offers for February Taiwanese material at $1,875-1,880/tonne.

The January US butadiene (BD) contract is expected to slide 2 cents/lb to 63 cents/lb, following nominations by four producers.

These range from a 3 cent/lb increase to a 2 cent/lb drop. The US BD contract settles at the lowest of the producer nominations.

The other two nominations were for a 1 cent/lb hike, and a rollover from the previous month. The December 2009 contract fell by 3 cents/lb to settle at 65 cents/lb.

The February BD settlement is likely to begin climbing again because of strength in the Asian BD market, suggests a styrene butadiene rubber (SBR) producer.

Sellers say that Asian SBR contracts for the first quarter (Q1) have settled $150-200/tonne above Q4 2009 because of strong Chinese demand and the soaring cost of feedstock BD.

"We have settled the Q1 contracts for non-oil grade 1502 SBR at $1,850-2,050/tonne CFR Asia," says a Chinese SBR seller. Q4 contracts were settled at $1,700-1,850/tonne.

"The wide price range reflects the time the quarterly contracts were settled. The price was lower for those who settled earlier and higher for those who settled later due to the soaring BD costs," adds another producer.

BD prices have surged by nearly $400/tonne in the past month to $1,800-1,850/tonne for January spot shipments.

Europe's January benzene contract has emerged at €759/tonne - up by €189/tonne from the month before. The increase is in line with higher spot values caused by ongoing export opportunities and domestic supply constraints.

One consumer involved in the negotiations says it agreed to the figure, but was unhappy with the outcome. "We are not satisfied with the number and in general not satisfied with the negotiation process," says the source, adding that it aims to change its negotiation process by February.

The latest settlement was made at a dollar concept of $1,095/tonne FOB Northwest Europe (NWE).

Other players confirm that there is ongoing discussion about the benzene negotiation process, which is based on the trading numbers of the penultimate day of the month.

Some sources had previously announced their intention to base January contract negotiations on several days of trading instead of just one, but feedback from other players involved in the negotiations revealed otherwise.

It is still uncertain whether there will be any changes for the February negotiations.

Several initial January European toluene settlements have been agreed around $83-85/tonne higher than the previous month, taking prices to $855-870/tonne FOB NWE.

"We see a tight market in Europe," notes a seller. "All across the chain there are low stocks for the year end, but at the same time there is good demand in Europe."

Confirmation from other players was still pending early last week.

European methanol Q1 contract negotiations have made little progress over the holiday period, with participants no closer to settling on a price.

There has been little urgency to settle with the market quiet, and most players said they were content to wait until the first week of January before continuing talks in earnest.

Sources on both sides complain of inflexibility from major buyers and sellers.

"The larger sellers are being stubborn and refusing to lower their offers," points out one buyer.

Currently, the majority of buyers are arguing for a rollover of €223/tonne FOB Rotterdam. However, sellers say they are pushing for increases as high as €260/tonne, although €240/tonne is a more commonly quoted target.


European polystyrene (PS) producers are planning hefty increases of €170-185/tonne for January prices after the styrene barge monomer contract settled €172/tonne higher than the month before. The January styrene contract was agreed at €1,018/tonne FD Northwest Europe (NWE).

"This is a super-sharp, shocking increase. But unfortunately, it's the reality of my cost position," says one producer.

US-based Dow Chemical has adjusted its earlier increase of €120/tonne for January PS to €170/tonne, while Germany's BASF announced a €180/tonne hike. US-headquartered INEOS NOVA, meanwhile, is looking for a €185/tonne increase.

General purpose polystyrene (GPPS) values had been trading in the mid-to-high-€900s/tonne FD NWE in December 2009, but offers are now in the mid-€1,100s/tonne.

Buyers now expect large increases when discussing January prices. "If I get away with paying a €150/tonne increase in January, I will count myself lucky," says one large buyer.

By: Andy Brice
+44 20 8652 3214

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