Chemical market trends: Feedstocks bump up prices

29 June 2009 00:00  [Source: ICB]

A surge in raw material costs sees players push for higher prices. US BD buyers are shocked by scale of July hikes. Q3 SBR contracts soar by $200/tonne in Asia

ethylene
In an effort to boost margins, Europe's initial ethylene contract for July has been agreed at €785/tonne FD Northwest Europe (NWE) - an €80/tonne leap from June's settlement.

An increase had been widely expected because of the firming price of feedstock naphtha, which has destroyed cracker margins over the past few weeks.

ethylene glycol
In the US, ethylene glycol (EG) producers are seeking July 1 price hikes of 2-5 cents/lb.

The short-term supply-demand balance, a small uptick in feedstock ethylene values and early signs of a rise in the mono ethylene glycol (MEG) Asian Contract Price for July are the likely reasons for the price proposals, says a reseller.

However, it is still too early to know if the proposals will succeed, it adds.

Industrial-grade EG (EGI) is currently pegged at 25.5-31 cents/lb FOB.

vinyl chloride monomer
Offers for July-delivery vinyl chloride monomer (VCM) cargoes in Asia have emerged $60/tonne above the previous month, according to traders and producers.

Offers are reported at $720/tonne CFR NE Asia, compared with $660/tonne for June cargoes.

The hike, which traders and producers attribute partly to surging feedstock costs, is in line with the $80/tonne increase seen in the downstream polyvinyl chloride (PVC) market.

propylene
An initial European propylene July contract has been agreed at €650/tonne FD NWE - marking an €85/tonne increase from June.

The hike is an attempt to improve cracker margins against a backdrop of a tight supply and demand balance, says one major integrated buyer.

This came as little surprise given strengthening naphtha values and the stretched availability.

Producers had been eyeing increases of as much as €150/tonne.

butadiene
US butadiene (BD) contracts look likely to jump to 45 cents/lb in July, based on a final producer nomination of a 14 cents/lb increase last Tuesday. Contracts usually settle at the lowest price put forward by the four main US producers: initiatives ranged from 14-20 cents/lb.

Buyers, however, were shocked by the latest nominations, as they had expected producers to push for a much-smaller increase, despite tight supply and higher energy prices.

Sentiment among buyers suggests that the US market cannot cope with such an increase in feedstock prices, given the current economic environment.

Buyers had expected BD to rise by about 4 cents/lb, in a repeat of the June settlement.

June contracts settled at 31 cents/lb, up 4 cents/lb from May.

styrene butadiene rubber
Asian third quarter (Q3) styrene butadiene rubber (SBR) contracts have settled $200/tonne higher than the April-June period due to rising BD costs.

Some Q3 non-oil grade 1502 SBR contracts settled at $1,350-1,450/tonne CFR Asia with tire makers.

The downstream tire producers were seeking a rollover from Q2 contracts, but were unsuccessful due to soaring feedstock costs.

BD offers have surged to $900-950/tonne CFR NE Asia, up around $200/tonne from levels seen in early June.

bisphenol a
June bisphenol A (BPA) contracts in Europe have been agreed at €930-1,050/tonne, up €30-50/tonne from May.

Players concur that price increases are largely driven by gains in the benzene and phenol markets.

Downstream demand is said to be improving. One buyer agrees that the bottom of the market has now been reached, while another source cites a seasonal pick-up in the epoxy resins market, albeit muted compared with previous years.

Although export opportunities to Asia have helped to sustain buyer interest in May, both buyers and sellers agree that the arbitrage window has now effectively closed.

Looking forward, producers are upbeat. As players scale back operations over the summer, both buyers and sellers feel that availability will tighten.

paraxylene
Japanese paraxylene (PX) producer Idemitsu Kosan has proposed a $50/tonne increase for July's contract.

A company source says that stable demand and tight supply prompted the July Asian contract price (ACP) of $1,060/tonne CFR Asia.

Japan's Nippon Oil, meanwhile, had earlier nominated its ACP $40/tonne higher, with US-major ExxonMobil proposing a $30/tonne hike.

purified terephthalic acid
The European May purified terephthalic acid (PTA) contract has settled at €727-750/tonne, up by €60-72/tonne from April.

Both buyers and sellers suggest that the increase is because of rising PX numbers upstream.

Demand in June was said to be healthy, and numerous sources say they felt that this trend would continue into July.

styrene acrylonitrile
European styrene acrylonitrile (SAN) June contracts have risen €20-40/tonne from May due to higher raw material costs.

Commercial-grade SAN is reported at €1,360-1,520/tonne FD NWE.

Manufacturers had originally been looking for hikes of €90/tonne in an attempt to improve margins.

Buyers say that they were worried that market fundamentals would not support an increase of any kind.

Demand for SAN is weak in southern Europe, while it has appeared to stabilize in the north.

However, many on the trading and buying sides expect demand to taper off as the European summer season approaches.

ASIAN ACN SELLERS LOOKING TO OTHER MARKETS
Asian acrylonitrile (ACN) sellers will continue targeting India and the Middle East, while Chinese demand slumps due to an influx of deep-sea cargoes.

Chinese traders have capitalized on the opening of the arbitrage window from the US Gulf to Asia in recent months, when US Gulf values were much lower than in Asia.

As a result, they procured large quantities of lower-cost ACN. Some 10,000-15,000 tonnes of material arrived in China every month in the second quarter.

The slump in Chinese demand has prompted the Japanese, Taiwanese and South Korean ACN producers to target other markets such as India, Iran and Turkey.

"The Chinese market is not buying at the moment as they have too much supply, but demand from India, Turkey and Iran is very good and we can sell above $1,200/tonne easily," says one Japanese trader. Asian ACN producers have been seeking prices above $1,200/tonne CFR Asia but Chinese buying indications for imports are below $1,100/tonne CFR, weighed down by the weak domestic ACN prices in China.

ICIS Copyright © Reed Business Information 2009

Author: Andy Brice
+44 20 8652 3214

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.