Rising crude loses influence on Asia petchems

14 March 2008 05:10  [Source: ICIS news]

By Florence Tan

SINGAPORE (ICIS news)--Crude oil prices, which have been creating record highs over the past three days, are losing their influence on the Asian petrochemical markets especially aromatics, market sources said on Friday.

Prices of naphtha and aromatics usually react quickly to changes in crude, but some were already near record highs, traders said adding that weak demand and excess supply of some petrochemicals like benzene also failed to prop up prices.

"Oil prices do not affect the market now. The cash shortage among end-users and whether they could pass on current high costs are bigger concerns," a trader said.

However, high crude prices helped to keep sentiment firm in the market, leaving little room for prices to fall, one producer said.

US April crude futures hit a record $111/bbl intraday late on Thursday in the US as a weak US dollar and recession fears drew more funds to the commodity. The rise of heating oil futures also boosted prices.

However, it softened $0.70/bbl to $109.63/bbl in Asia on Friday.

Second half April naphtha price indications rose $3.75/tonne on Friday to $912.50-915.50/tonne CFR (cost and freight) Japan. However, Asian naphtha premiums have flipped into discount for the first time this year due to weak margins from downstream ethylene.

Benzene prices were largely stable at $1,080-1,090/tonne FOB (free on board) Korea as demand was not expected to improve until a few weeks later, traders said.

Downstream styrene monomer (SM) and caprolactam prices were also unaffected by the record crude price.

SM buy-sell indications for April remained at $1,415-1,435/tonne FOB Korea while offers in eastern China were unchanged at yuan (CNY) 11,650/tonne ($1,643/tonne) ex-tank on Friday from Thursday.

Spot caprolactam was already at a record high of $2,480-2,540/tonne CFR northeast Asia (NE Asia) this week due mainly to limited supply and high upstream costs.

Toluene prices were notionally pegged unchanged at $1,005-1,020/tonne FOB Korea, near record highs, and the approaching summer gasoline peak season was expected to boost values further, they added.

Isomer-grade mixed xylene prices were notionally assessed higher at $1,015-1,030/tonne FOB Korea.

Paraxylene (PX) offers were firm at $1,280/tonne CFR Taiwan and above, but there were no takers at the moment, traders said.

The sentiment was bullish on rising downstream values, but buyers were unsure if rising crude oil prices could reverse the trend in the next few days.

Propylene prices rose $40/tonne this week to $1,190-1,230/tonne CFR NE Asia as sentiment improved on expectations of tighter supply in Asia due to cracker output cuts.

Downstream polymers such as polyethylene (PE) and polyvinyl chloride (PVC) continued to move up as China’s demand picked up in March from last month, JP Morgan analyst Samuel Lee said.

In February, heavy snow storms cut power and logistics in southern China, greatly reducing polymer demand.

"Higher crude is taking downstream prices higher, but US dollar-based prices are also adjusting to higher Asian currencies as well," Lee added.

Wan Hsin Hun, Desmond Chia, Clive Ong, Salmon Aidan Lee, Kew Jia Hui and Mahua Chakravarty contributed to this article.

($1=CNY7.09)

ICIS Copyright © Reed Business Information 2009

Author: Florence Tan
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