Intermediates: Quake brings uncertainty to Asia

28 March 2011 00:00  [Source: ICB]

The earthquake and tsunami in Japan have interrupted supply of a raft of products

Plant outages resulting from the earthquake and tsunami that struck Japan on March 11 have thrown into question the short-term Asian supply outlook for a broad slate of intermediate chemicals.

They include acetone, bisphenol A (BPA), butyl glycol, caprolactam (capro), cumene, cyclohexane (CX), epichlorohydrin (ECH), methyl ethyl ketone (MEK), methyl isobutyl ketone (MIBK), monoethylene glycol (MEG), monopropylene glycol (MPG), oxo-alcohols, propylene oxide (PO), phenol, polyether polyols, purified terephthalic acid (PTA) and toluene diphenylene diisocyanate (TDI).

PHENOL/ACETONE
Two phenol/acetone plants were forced off line: Mitsui Chemicals' plant in Chiba prefecture and Mitsubishi Chemical's plant in Kashima, Ibaraki prefecture.

The Mitsui plant, a joint venture with Idemitsu Kosan that can produce 230,000 tonnes/year of phenol and 138,000 tonnes/year of acetone, was restarted on March 17. Mitsubishi's plant, with capacities of 250,000 tonnes/year of phenol and 150,000 tonnes/year of acetone, remained off line at press time.

Owing to the shortage of acetone from Kashima, Mitsubishi's 20,000 tonne/year methyl isobutyl ketone (MIBK) plant in Mizushima, Okayama prefecture, was running at reduced rates.

Asian acetone prices have risen. Inventories in China are at historical highs, and derivative demand has been weak, but ongoing and impending turnarounds at northeast Asian facilities, a severe shortage of feedstock cumene, the shutdowns in Japan and a paucity of deep-sea cargoes have spurred concern that supplies may tighten next month.

Acetone prices were boosted by $25/tonne (€18/tonne) to $1,015-1,100/tonne CFR (cost and freight) CMP (China Main Port) in the week following the earthquake.

Asian phenol spot prices have likewise surged by $50/tonne to $1,800-1,950 CFR/CMP. Availability is tight across Asia, except in China and India, where inventory levels are relatively high.

BPA
Along with the Kashima phenol/acetone unit, Mitsubishi stopped a downstream 100,000 tonne/year BPA plant.

Mitsui, which was able to keep a second phenol/acetone plant at Chiba on line, has kept the site's 90,000 tonne/year BPA plant at full capacity.

Tight regional availability, exacerbated by the outages, lifted prices in the region by $50-70/tonne to $2,450-2,520 CFR NE (Northeast) Asia.

CAPROLACTAM
Although Japan's capro plants were undamaged, there are concerns about feedstock shortages and contract deliveries to the nylon and tirecord industry in China and Taiwan.

In the week after the earthquake, three key capro plants in Japan were preparing for production cuts. With another plant already undergoing a scheduled turnaround, the cuts could remove 50% of Japan's production capacity in the short term.

Japan has four capro producers - Ube Industries, Sumitomo Chemical, Toray Industries and Mitsubishi - which have a combined production capacity of 525,000 tonnes/year. Prices were mixed in the week ending March 16, with declines in China and increases in Taiwan ($30-50 to $3,530-3,560, CFR Taiwan) and Northeast Asia.

ECH
The market for ECH, already snug before the earthquake, has tightened. South Korea's Samsung Fine Chemicals took its 55,000 tonne/year plant in Ulsan, South Korea, off line in early March for a three-week turnaround.

After the earthquake, another 52,000 tonnes/year of capacity was unexpectedly removed from the market when Kashima Chemical shut its ECH facility in Kashima. The company could not say when production would return.

The shutdown could result in a supply shortfall in Korea, market participants suggested. They noted that Kashima Chemical has long-term supply contracts with several major Korean epoxy end-users. Prices rose by $10-30/tonne to $2,300-2,350/tonne CFR CMP (ISO-TANK).

IPA
JX Nippon Oil & Energy ceased IPA production at its 85,000 tonne/year plant in Kawasaki, where a 460,000 tonne/year cracker and olefins conversion unit were also taken off line. Sources say the facilities suffered no damage, and that the cracker could restart this month, if all goes well.

The outage, along with rising propylene and acetone costs, pushed up Asian IPA prices by another $50/tonne in Southeast Asia and by $10/tonne in NE Asia (to $1,430-1,460 CFR NE Asia) in the week after the earthquake.

MEG
MEG imports to Japan, typically below 10,000 tonnes/month, could rise substantially in the short term: Maruzen Petrochemical took a 115,000/year tonne MEG unit in Ichihara, Chiba, off line, while Mitsubishi took a 280,000 tonne/year unit in Kashima off line. As of press time, neither had returned to production.

Market participants said the volumes are too small to affect the broader Asian market. Supply is abundant and buying interest weak. Prices fell during the week to $25-30/tonne to $1,200-1,210/tonne CFR CMP.

MPG
Asahi Glass Co. shut its 110,000 tonne/year propylene oxide (PO), 42,000 tonne/year MPG and 80,000 tonne/year polyether polyols plants in Kashima after the earthquake, according to sources close to the company.

Rising Asian MPG prices seemed set to moderate amid weak Chinese demand, but at least one producer now aims to push a hike in April. In the week ending March 18, spot prices rose by $10/tonne to $1,810-1,870/tonne CFR NE Asia.

MEK
Maruzen Petrochemical stopped production of MEK at its 170,000 tonne/year plant in Chiba, which caught fire. Customers are bracing for extended disruption and significant market impact.

Operations at Tonen Chemical's 90,000 tonne/year unit in Kawasaki and Idemitsu Kosan's 40,000 tonne/year facility in Tokuyama have been normal so far, but some buyers worried that the two producers may reduce exports. Asian MEK prices surged by $80-150/tonne to $1,800-1,900/tonne CFR NE Asia. One distributor expected demand for ethyl acetate (etac), a solvent alternative, to rise by 10%.

PTA
PTA plants were not damaged, but paraxylene (PX) plants upstream were. JX Nippon Oil & Energy declared force majeure on PX after three of its plants, with a combined capacity of 950,000 tonnes/year, were damaged.

Spot prices for PX, the key feedstock for PTA, set a new record at $1,799-1,809/tonne CFR Taiwan and CMP in the week that followed, and PTA prices, already strong, rose $10-15/tonne to a 16-year high, $1,500-1,525/tonne CFR CMP.

TDI
Asian TDI prices, already strengthening, rose by $50/tonne by March 18 to $2,500-2,600 CFR CMP/Hong Kong, after Mitsui closed its 120,000 tonne/year plant in Kashima.

The facility was not damaged, but no date has been set yet for a restart.

Includes reporting by Helen Lee, Yeow Pei Lin, Liu Xin, Becky Zhang, Felicia Loo, Peh Soo Hwee, Junie Lin and Ong Sheau Ling in Singapore

By: Clay Boswell
+1 713 525 2653

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