FocusHigh crude little impact on Asia aromatics

22 February 2008 07:29  [Source: ICIS news]

By Mahua Chakravarty

SINGAPORE (ICIS news)--Weak fundamentals and cautious sentiment kept gains in Asian aromatics modest at $10-35/tonne despite crude breaching the $100/bbl mark earlier this week, but demand was expected to pick up in the months ahead, said buyers and sellers on Friday.

Traders said that the limited gains came on the back of poor market fundamentals prevailing in Asia. Demand from buyers, especially in China, after the Chinese New Year holidays had yet to pick up.

However, in March and April, demand for aromatics in gasoline blending would surge ahead of the US summer driving season. This would cut US’ toluene and isomer grade xylene supply to Asia while boosting Asia’s benzene exports to the US.

Demand for toluene and xylenes would also pick up in China’s downstream solvents segment, said traders.

Toluene prices in Asia rose to $960-980/tonne FOB (free on board) Korea at the close of Thursday’s trades, only $10-15/tonne higher than the level seen earlier on Tuesday.

"Traders are wary about pushing FOB Korea prices higher, as they are not sure whether buyers would eventually take the physical cargoes or not," said a Korean producer.

Hence, traders were heard waiting at the sidelines resulting in a single toluene deal heard on FOB Korea basis through the week.

"An underlying sense of caution and lack of confidence in the market direction was keeping buyers and sellers at the sidelines," said a toluene distributor.

In the isomer grade xylene market, a similar subdued trend was seen throughout the week. Prices rose about $15-20/tonne to $920-930/tonne FOB Korea on Friday from Tuesday. Gains were limited due to ample supply in Asia and weak demand from downstream paraxylene (PX) producers seen from the past weeks, said a producer and an end-user.

"Although PX prices have been bullish this week, but we are still watching the market," said a MX end-user.

In the PX market, the gains were modest compared with jumps seen in previous years when crude passed the $60/bbl and $80/bbl psychological levels.

Earlier in the month amid the Chinese New Year holiday lull, PX prices hovered at $1,115-1,135/tonne CFR (cost and freight) Taiwan, with the top-end numbers largely talk among traders. End-users kept buying ideas at no higher than $1,120/tonne CFR China and $1,115/tonne CFR Taiwan.

"It’s been like that for the past two years as several traders exited the market and liquidity had dipped," said a Singapore-based trader at an international trading house.

Hence, even as crude futures rose above $100/bbl, the gains were no more than $30-35/tonne with Thursday’s close keeping at $1,150/tonne CFR Taiwan and again largely talked up rather than based on actual deals.

"What the market needs is a push from the downstream sectors; if the downstream does well, it can support higher PX numbers led by crude gains, said a PX end-user in Taiwan.

"If not, even if crude keeps rising, there’s a limit on how much higher PX can keep up to it."

Styrene monomer (SM) values were also little changed from mid-week. Buy-sell indications for April cargoes were pegged around $1,385-1,405/tonne FOB Korea, with fixtures around $1,395-1,405/tonne FOB Korea for any April shipment.

Benzene saw the highest jump of $30-33/tonne from Tuesday to Friday’s $1,108-1,120/tonne FOB Korea.

A general positive market sentiment due to the recent hikes in crude values and also a firm trend in the US and European markets were keeping benzene on a firm track, said a Korean producer.

This upturn in prices happened despite poor demand from downstream SM segment and ample supply in Asia, said producers.

Earlier this week, NYMEX light sweet crude futures touched a new record high above $100/bbl.

Asian open spec naphtha also surged to a record high of $905/tonne CFR Japan on Thursday on the back of crude spikes and market tightness.

Clive Ong and Salmon Aidan Lee contributed to this article.

ICIS Copyright © Reed Business Information 2009

Author: Mahua Chakravarty
+65 6780 4359

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