Asia 2-EH may fall on increased supply, lower feedstock cost

19 August 2014 05:22 Source:ICIS News

Focus story by Trixie Yapprice fall

SINGAPORE (ICIS)--Spot 2-ethylhexanol (2-EH) prices in Asia may face downward pressure on the back of an increase in supply in the domestic China market and amid easing feedstock propylene costs, market participants said on Tuesday.

Spot 2-EH prices in east Asia for dutiable cargoes have been on a slight uptrend, closing at an average of $1,450/tonne on a CFR (cost & freight) basis on 15 August, compared with an average of $1,432.50/tonne CFR in end-May, according to ICIS data. However, market participants do not expect these gains to extend further, given the fall in spot propylene prices in the previous weeks.

Feedstock propylene prices, on a CFR northeast (NE) Asia basis, fell by an average of $75/tonne in the past three weeks, according to ICIS data.

Buyers are expecting the drop in feedstock costs to encourage some producers to pass on the cost savings and lower their offers for second-half September shipments, a northeast Asian trader said.

Subsequently, discussions have slowed down, with both buyers and producers taking to the sidelines on expectations of a price decrease in the near term.

2-EH prices, on a non-dutiable basis, have already started showing signs of a softer tend and this is likely to also happen with the spot dutiable prices, a northeast Asia-based buyers said.

On a non-dutiable basis, prices have fallen by $20/tonne on the low end in the week ended 15 August, compared with the previous week, as some buyers lowered their buying indications in expectations of a price drop in the next few weeks.

A China-based exporter acknowledged that it could possibly offer lower prices on an FOB (free on board) basis for second-half September shipments, given the ease in propylene costs. It added that the rise in domestic supply in China, following a major plant start-up at Luxi Chemical and a plant restart by Shandong Lihuayi, is likely to put a downward pressure on yuan-denominated prices, which in turn could weigh on the buying sentiment in both the domestic China and east Asian markets.

“The downstream plasticizer and acrylate sector may be picking up gradually, but overall demand is still lower-than-expected and no one will be purchasing more than their monthly requirements,” a key plasticizer maker in east Asia said.

Domestic prices in the east China market were at yuan (CNY) 10,400-10,500/tonne ($1,694-1,710/tonne) ex-tank on 18 August, down by CNY250-300/tonne from 15 August, while in south China, prices were at CNY10,100-10,200/tonne ex-tank, down by CNY300/tonne over the same period, according to Chemease, an ICIS service in China.

 A few southeast Asia-based producers, who had been receiving spot import enquiries from several China-based buyers because of a previous rise in yuan-denominated prices, added that some buyers are staying cautious now because of the expectation of a price downtrend.

“China-based buyers are cautious, even though they have spot import appetite, because of the higher operating rates and increase in supply expected for second-half of September,” a southeast Asia-based producer said.

Average operating rates at plants in China were at around 70% as of 18 August, an increase of 10 percentage points week on week, ICIS data showed.   

($1 = CNY6.14)

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

By Trixie Yap