Asia, Mideast LAB under pressure from cheap China cargoes

Focus story by Fahima Khail

SINGAPORE (ICIS)–Spot prices of linear alkyl benzene (LAB) in Asia and the Middle East may continue to weaken on soft demand, and with cheaper cargoes available from China, industry sources said.

Recent declines in costs of raw material crude and feedstock  benzene and jet kerosene will also weigh on the LAB market, they said.

In southeast Asia, LAB import prices were assessed at $1,800-1,830/tonne CFR (cost and freight) SE Asia on  23 July, down $10-20/tonne from the previous week, according to ICIS data.

Export prices in the Middle East fell by $10-20/tonne week on week to $1,740-1,780/tonne FOB (free on board) Middle East on 23 July, the data showed.

Middle Eastern and northeast Asian sellers largely compete in the Indian and southeast Asian markets.

China-based producers currently saddled with high LAB inventory are offering export cargoes at lower prices to south and southeast Asia, thus, exerting heavy downward pressure on prices of material originating in northeast Asia and the Middle East, market sources said.

Workable selling ideas for Chinese origin material exported to SE Asia were indicated at 1,660-1,700/tonne FOB NE Asia in flexi tanks and bulk cargoes.

“We offered [material] at $1,800/tonne CFR SE Asia in flexi tanks, but there was no interest from customers,” a Middle East-based seller said.
In India, LAB import  prices were assessed at $1,790-1,800/tonne CFR India  on 23 July, $10-30/tonne lower week on week, according to ICIS data.

Selling ideas for Chinese-origin LAB were heard at $1,750/tonne CFR India, while those for South Korean material were quoted at $1,740/tonne CFR India, market sources said.

A number of LAB producers in China have lowered operating rates at their plants amid an oversupply in the domestic market, industry sources said.

Some market sources said that China-based producers have been cutting production and exporting volumes to stabilise the oversupplied domestic and neighbouring southeast Asia markets.

“We are still running at 50% production rate because of poor domestic market and oversupply. We will not export material to southeast Asia in August and expect to resume negotiations in September,” a China based producer said.

The producer sold end-July shipments to southeast Asia at $1,730/tonne CFR SE Asia in flexi tanks and bulk.

Lower LAB indications were heard from the Middle East to Asian suppliers in a subdued market last week, ahead of the Eid-ul-Fitr holiday, industry sources said.

Eid-ul-Fitr, a celebration marking the end of the Muslim fasting month of Ramadan, in the Middle East and in some parts of Asia.

Export prices in the northeast Asian (NE) markets fell by $10-20/tonne to $1,750-1790/tonne FOB (free on board) NE Asia on 23 July, with negotiations in the import markets heard at lower levels, according to ICIS.

Downstream linear alkylbenzene sulphonate (LAS) prices in northeast and SE Asia also softened in the week ending 23 July.

LAS import prices in southeast Asia were assessed at $1,480-1,500/tonne CFR SE Asia, down by $10-20/tonne from the previous week, according to ICIS data.

Northeast Asia’s export prices for the material were assessed at $1,460-1,490/tonne FOB NE Asia, down $20/tonne over the same period, the data showed.

“[LAS] price [has] continued to fall in past weeks and our last purchase price was near to $1,490[/tonne CFR SE Asia],” a buyer said.

“The price might fall further in August, but it is very much dependent on the crude oil price which [was] recently affected by [the] turmoil between Russia and Ukraine, [which] worsened after [Malaysia Airline flight] MH17 crashed” a buyer said.

Russia is facing tighter international sanctions after its incursion into the Ukraine in March. MH17, a commercial airplane carrying a total of 296 passengers and crew, was downed on 17 July while flying over Ukraine, near a pro-Russian rebel territory.

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