OUTLOOK ‘13: Asia oxo-alcohols to track propylene prices in 2013

27 December 2012 02:43  [Source: ICIS news]

By Samuel Wong

Oxo alcohols are used in paintsSINGAPORE (ICIS)--Asia oxo-alcohols prices are likely to track closer to feedstock propylene values in 2013 following new capacities as more plants come on stream in China, industry sources said.

The dynamics especially in the 2-ethyhexanol (2-EH) sector are likely to change, from a generally tightly-supplied market to a market where supply increases due to new plants, they added.

“With the new start-ups, the situation is likely to be quite difficult next year, with the likelihood of a supply influx” a southeast Asia-based producer said.

However, majority of players said the impact will unlikely to be seen in 2013, but in the years ahead.

“China is going to be self-sufficient, but this is not going to happen overnight,” a northeast Asia-based producer said.

“The real impact that will take place is likely only to be seen in 2014-2015,” a Japanese producer said.

It is going to take the new plants about two to three months before on-spec production can be reached, market players said.

“Supply is going to be in a long position for the coming years, resulting in sellers to take on a more competitive priced strategy,” a southeast Asia-based seller said.

This all boils down to the cost efficiency of the various producers, and feedstock propylene prices will be crucial to the price trends, he added.

The availability of feedstock propylene will also be the driving factor to what operating rates facilities will be running at, market participants said.

“Feedstock propylene is going to be limited, and it will not be surprising that the new plants will not going to be able to run at 100%,” a northeast Asia-based producer said.

For each tonne of 2-EH and NBA, about 650-700kg of propylene is required. In addition, an average cost of estimated of $250-450/tonne (€190-342/tonne) and $250-300/tonne is added onto the production cost respectively.

For the week ended 21 December, 2-EH materials subject to import tax increased by $20-30/tonne week on week to $1,560-1,600/tonne CFR East Asia, while parcels exempt from import duty were at $1,670-1,680/tonne CFR East Asia, up by $20-30/tonne from the previous week.

NBA prices on a CFR NE (northeast) Asia basis stood at $1,440-1,520/tonne CFR NE Asia, higher by $25-40/tonne from a week earlier, while propylene prices stood at $1,290-1,310/tonne CFR NE Asia on 21 December.

Several industry players were optimistic that prices have room to rise in 2013, as market sentiment seems bullish, anticipating firmer upstream values on improvement in the US and European economy.

“Demand in Q1 next year is expected to pick up on re-stocking activity before the Lunar New Year, while supply is expected to remain tight in the first quarter of 2013,” a northeast Asia-based producer said.

However, many cited prevailing weak downstream to be carried forward till next year, as the recovery will not be at such a fast pace, and the outlook does not look too bright.

“It looks like crude and naphtha are to remain firm, given support by lesser turnarounds on crackers, but it largely depends on downstream petrochemicals demand too,” an upstream trader said.

“The outlook remains unclear, as downstream demand doesn’t seem to be picking up,” she added.

Demand for China in 2013 is expected to reach 1.42m tonnes for NBA and 1.41m tonnes for 2-EH.

The new capacity in Asia is expected to be around 1.5m tonnes to 2.0m tonnes in the next one and a half year and around 3.9m by 2015, most of it coming from China.

Demand in 2015 is forecast to go up to around 2.44m tonnes for 2-EH from 2.15m tonnes in 2011, while for NBA demand is expected to increase to 2.44m tonnes from 1.99m tonnes in the same period.

“There will be strong headwinds ahead, and the markets must be prepared in the coming years,” a southeast Asia-based producer said.

2-EH is mainly used for the production for plasticizers like DOP and DOTP, and acrylate esters.

NBA is used for the production of butyl acrylate (butyl-A) and n-butyl acetate.

($1 = €0.76)

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

By: Samuel Wong

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