OUTLOOK ’14: Asia MA may retreat on butane price correction

By Matthew Chong

SINGAPORE (ICIS)–Spot prices of maleic anhydride (MA) briquette may fall in the first quarter after surging in December 2013, in line with the decline in cost of feedstock butane, market sources said.

Average MA prices rose by 7% last month to an eight-month high of $1,825/tonne  (€1,351/tonne) CFR (cost and freight) SE (southeast) Asia, on the back of an unexpected spike in butane contract price in December to $1,225/tonne FOB (free on board) Ras Tanura, according to ICIS data.

“It is not unusual for butane prices to rise every year-end as it [butane] is used for heating in winter,” said a southeast Asian supplier, but added that the magnitude of increase in December last year “has caught everyone by surprise”.

For January 2014, however, butane contract prices retreated $205/tonne to $1,020/tonne FOB  Ras Tanura, according to C1 Energy, an ICIS service in China (please see table below).

MA prices would likely fall back to around $1,700/tonne CFR SE Asia, in line with the expected decline in butane prices in the coming months, market participants said.

Butane prices are expected to fall to around $800-1,000/tonne FOB Ras Tanura leading to summer months, when demand is expected to wane, they said.

Either butane or benzene can be used as feedstock for MA production. In Asia ex-China, the bulk of MA facilities are butane-based.

Only two producers in Asia outside of China – Japan’s Nippon Shokubai and Indonesia’s Justus Sakti Raya – produce the material using benzene as feedstock. They account for 7-10% of the total MA nameplate capacity in Asia outside China, according to ICIS data.

Most plants outside China ran at an average rate of 80-90% in 2013, market sources said.

In China, most producers use benzene as feedstock for MA production. But the country’s exports of the material slowed to a trickle in the second half of last year as most producers opted to serve the domestic market, where prices were higher.

Major Chinese MA exporters said that they would only consider ramping up production for export if Asian import prices were to rise above $1,850/tonne CFR SE Asia.

MA demand and supply is expected to be fairly balanced in 2014 as stable demand offset the fairly limited new supply expansion planned this year.

Downstream demand from butanediol (BDO) and unsaturated polyester resins (UPR) is likely to remain largely stable, albeit weak, because of lacklustre construction sector amid harsh economic conditions, market sources said.

Market participants are hopeful that demand will show a slight improvement in early February, after the Lunar New Year.

The Lunar New Year falls on 31 January 2014.

“My customers [end-users of alkyd resins] are likely to reduce their plant operating rates in January as they are anticipating a fall in end-user demand ahead of the Lunar New Year,” a southeast Asian buyer said.

Meanwhile, some 50,000 tonnes/year of new MA capacity is expected to come on stream in Taiwan this year.

In February, Taiwan’s Tasco Chemical will have expanded the capacity of its existing Kaohsiung facility by 10,000 tonne/year.

Asia ex-China is estimated to have an MA nameplate capacity of 500,000 tonnes/year.

Taiwan Prosperity Chemical Corp (TPCC), on the other hand, expects to start up its new 40,000 tonne/year MA plant, also in Kaohsiung sometime in the first half of the year.

TPCC’s new supply would mainly be for captive use of its new BDO plant, which is scheduled to start up slightly earlier than its MA plant, a company source said.

($1 = €0.74)