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

LAB and LAS go into detergentsMUMBAI (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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