FocusAsia, Middle East demand for LAB, LAS to grow 3-5% in 2013

12 December 2012 06:14  [Source: ICIS news]

(adds Egypt's Ameriya Petroleum Refining Co in the production table below)

By Prema Viswanathan

MUMBAI (ICIS)--Demand for linear alkyl benzene (LAB) and its derivative LAB sulphonate (LAS) in Asia and the Middle East will likely grow by 3-5% in 2013, with buying activities expected to pick up  from the current slump, industry sources said on Wednesday.

Total demand in Asia for LAB is currently estimated at around 1.4m tonnes/year, while the combined consumption in the Middle East and north Africa is pegged at more than 400,000 tonnes/year, they said.

Producers in Asia and the Middle East are currently reeling under margins pressure as buying sentiment for LAB and LAS that go into detergents has been bearish in recent months, market players said.

“Although the detergents sector is supposed to be recession-proof, buying activity has slowed considerably in the fourth quarter of 2012, as buyers are very uncertain about when the global economy will recover,” said a southeast Asian LAB maker.

Demand may get a boost within the first quarter, when Chinese buyers return to the market after the Lunar New Year holidays in February, industry sources said. But others are less optimistic, expecting demand to improve in the second quarter.

LAB makers are increasingly worried over the volatile prices of feedstock benzene that squeeze their production margins.

In the week ended 7 December, Asian benzene prices were at $1,480/tonne (€1,140/tonne) FOB (free on board) Korea, a 49% jump from six months earlier, according to ICIS.

“Prices of key feedstock benzene have risen sharply in recent months, exerting tremendous pressure on LAB margins,” said an Indian LAB maker.

LAB offers last week were at around $1,900-1950/tonne FOB (free on board) across Asia, with buying ideas at least $50/tonne lower, market players said.

“LAB prices have not been able to keep pace with the rise in benzene costs,” the Indian producer said.

Buyers in Asia and Middle East currently prefer to keep LAB inventories low as 2012 is drawing to a close. Suppliers, on the other hand, are maintaining their offers, citing high costs of feedstock benzene and a shortage of n-paraffin feedstock.

South Korea, which is a key LAB exporting country, shipped out 5.6% less material in the third quarter at 33,822 tonnes compared with the same period last year, according to official data.

The country had little supply available to export as its sole LAB producer, Isu Chemical, built up stocks in September to meet domestic commitments ahead of the company’s three-week maintenance at its facility.

South Korea’s third-quarter LAS exports, on the other hand, jumped by 35.9% year on year, supported by a relatively strong demand in the rest of Asia, especially in the emerging markets like Vietnam.

For LAS producers in Asia, the margin squeeze was even more severe than for LAB makers, industry sources said.

LAS makers have not been able to raise prices in tandem with LAB costs because of strong resistance posed by end-users, driving many of them to cut production.

Discussion levels for LAS are currently at $1,600-1,620/tonne CFR (cost and freight) in southeast Asia, a major market for LAS, market sources said.

“Compared with LAB costs, which have risen to above $1,900/tonne CFR SE Asia, LAS prices are still low and this is squeezing our margins,” said an Indonesian LAS maker.

Lower-priced LAS exports out of China this year have also been exerting pressure on the market, industry sources said.

China has emerged as a significant exporter of LAS, having exported 32,361 tonnes in the third quarter, up by 14.8% year on year, according to official data.

“Chinese LAS exports are typically priced around $30-40/tonne lower than exports out of South Korea, and this is spoiling the market for us,” said a South Korean LAS maker.

ICIS is launching a pricing report on LAB and LAS for Asia and the Middle East later on 12 December.

In the Middle East, political uncertainty has been dampening demand for LAB and LAS, with only a few countries, like Saudi Arabia, displaying a relatively strong demand growth.

Iraq’s sole LAB producer Arab Company for Detergent Chemicals, is running its 50,000 tonne/year plant at 80% capacity due to poor domestic demand, a source close to the company said.

The company usually exports more than 90% of its output to neighbouring countries such as Jordan, Syria and Turkey by road, as shipping ports are not functional because of the political unrest in the region.

LAB Producers in Asia, Middle East & North Africa	Country	Capacity (tonnes/year)
Fushun Petrochemical Co	China	200,000
Jin Tung Petrochemical Corp Ltd	China	200,000
Sinopec Jinling Petrochemical Co Ltd	China	100,000
Isu Chemical	China (Taicang)	100,000
Indian Oil Corp - (IOC)	India	120,000
Nirma Ltd	India	100,000
Reliance Industries Ltd - (RIL)	India	180,000
Tamilnadu Petroproducts Ltd - (TPL)	India	120,000
Unggul Indah Cahaya PT - (UIC)	Indonesia	210,000
JX Nippon Oil and Energy Corp	Japan	45,000
Isu Chemical Co Ltd	South Korea	180,000
Formosan Union Chemical Corp - (FUCC)	Taiwan	90,000
Bistun Petrochemical Co	Iran	55,000
Iran Chemical Industries Investment Co - (ICIIC)	Iran	75,000
SEEF Ltd	Qatar	100,000
Gulf Farabi Petrochemical Co	Saudi Arabia	140,000
United Joint Stock Co for Petrochemical Industries - (UCPI)	Syria	40,000
Arab Co for Detergent Chemicals	Iraq	50,000
Emirates for Linear Alkylbenzene (Emalab)	UAE	30,000
Egypt Linear Alkylbenzene Co	Egypt	100,000
Ameriya Petroleum Refining Co	Egypt	50,000

($1 = €0.77)

Request a free sample of the ICIS LAB and sulphonate price report

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By: Prema Viswanathan
+65 6780 4359

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