OUTLOOK ’13: Asia ethanolamines prices to bottom out in early 2013

02 January 2013 03:20  [Source: ICIS news]

By Becky Zhang

SINGAPORE (ICIS)--Asia’s ethanolamines prices are expected to bottom out in early 2013 because of an expected stabilising feedstock ethylene oxide (EO) price in China, tighter supply and a recovery of demand, market sources said.

Drummed ethanolamines were under discussions at $1,150-1,200/tonne (€874-912/tonne) CIF (cost, insurance & freight) China for monoethanolamine (MEA), $1,300-1,350/tonne CIF China for diethanolamine (DEA) and $1,400-1,450/tonne CIF China for triethanolamine (TEA) in end-December, sources said.

This represents an 8%, 12-13% and 6-7% price decrease, respectively, for the three grades of ethanolamines since late November because of bearish price outlook for feedstock EO, according to ICIS.

China’s EO prices have fallen by 9% in December to yuan (CNY) 11,800/tonne ($1,894/tonne) ex-warehouse (EXWH) in eastern China, according to ICIS.

Market players expect Sinopec to revise down EO price further in January to recover derivative products’ margins and to balance weaker demand, a Zhejiang-based ethanolamines trader said.

However, the potential decrease is believed to be “limited” with support from firm upstream ethylene prices and the recent bullish downstream monoethylene glycol (MEG) prices - the major EO derivative product, the trader said.

“We are maintaining a minimum level of ethanolamine inventory until EO price stabilises,” said a Suzhou-based surfactant maker who consumes 100-200 tonnes of ethanolamines per month.

EO is one of the most important indexes for end-users and traders to detect the price trend in China’s ethanolamines.

The volatility of EO prices has led to major up and downs in ethanolamines prices in the past year, according to ICIS data.

Market players in southeast Asia and India care more about supply than EO prices which are not as transparent as that in China.

“Ethanolamines demand in southeast Asia is relatively smaller [than China], but is quite stable,” a major southeast Asian trader said.

“Suppliers adjust [southeast Asia] prices mainly based on supply conditions,” the trader said.

This was echoed by an Indian trader who was forced to raise ethanolamines prices in India for November and December shipments as a southeast Asian producer’s plant shutdown in early December led to limited export availability to India.

The expected shutdown at Saudi Arabia’s Kayan Petrochemical in the first quarter of 2013 is believed by market players in India and China to have some impact on the market as its ethanolamines plant is the largest in Asia and Middle East region.

Kayan Petrochemical, a subsidiary of SABIC, is expected to shut its 100,000 tonne/year ethanolamines plant at Al Jubail in the first quarter of 2013 for around 10 weeks to liaise with repair work at co-product 650,000 tonne/year ethylene glycol (EG) plant at the same site, market sources said.

However, the company declined to comment on the shutdown.

Continued production cutbacks in China and Asia will keep supply tight and will help underpin prices, market players said.

Some Chinese local ethanolamines plants in northern China have been shut since late December because of poor market situation, said a Chinese trader who deals with local material.

“China’s ethanolamines producers’ inventories will come down to low levels after the round of destocking sales,” a Zhejiang-based trader said.

Some China’s ethanolamines producers have been offloading their inventories actively since early December and have contributed to the price decreases during the period, the trader added.

“Once demand picks up the market will soon become tight,” the trader said and admitted that they are considering to place orders for imported material.

There were different opinions from market players.

“It takes time for the downstream demand to recover and it is not likely to improve much ahead of Chinese Lunar New Year,” a Zhejiang-based ethanolamines producer said.

The producer said demand from downstream sectors, including surfactant, cement, glyphosate, pharmaceutical and metal/water treatment industries, normally improves in early March after the Chinese Lunar New Year holidays on 9-15 February.

“Manufacturing activities usually speed up during the period from March to June,” the producer added.

On the other hand, China’s EO prices are facing challenges from quick capacity expansion in 2013 driven by lucrative margins, a Zhejiang-based trader said.

“We expect EO prices to be lower in 2013 than the average level in 2012, and that will weigh on ethanolamines prices,” the trader said.

($1 = €0.76)

By: Becky Zhang
+65 6780 4359

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