Price and market trends: Cautious buying for China amines eyed post-Lunar New Year

31 January 2014 10:01 Source:ICIS Chemical Business

Demand ebbs away as the Lunar New Year holidays approach amid tepid macroeconomic conditions

Ethanolamines end-users in China are likely to adopt a cautious buying attitude after the Lunar New Year holidays, in view of the recent spike in cost of feedstock ethylene oxide (EO), market participants said on 24 January.


 Inventory builds ahead of Chinese New Year were limited

Copyright: Rex Features

Ahead of the Lunar New Year holidays, which kicked off last week, demand has started to slow down as many factories in northern China have been shuttered, they said.

The market participants themselves are closing their books and preparing to head off for their holidays.

On a macro level, China – the world’s second-biggest economy after the US – has been facing credit tightening in a bid to fend off a bubble economy, which consequently chipped the demand in the downstream amines sector.

Reflecting this, stockpiling of ethanolamines ahead of the festive period was lukewarm compared with the previous year, and the end-users are controlling their inventories at normal requirements and nothing excessive, the market participants said.

“They [buyers] have been guarded. Even after the Lunar New Year, the buying will be cautious. The EO suppliers are expected to increase their run rates after [Lunar] New Year, as the plant maintenance would have ended before the festive holidays,” said one market participant based in east China.

“Plus, with the credit issue, it is tough for the downstream enterprises to do business,” he added.

In China, the domestic prices for monoethanolamines (MEA), diethanolamines (DEA) and triethanolamines (TEA) were assessed as unchanged in the week ended 22 January, because of very limited transactions heard.

Ethanolamines has applications in agrochemicals, surfactants, personal care and construction. MEA is produced by reacting ethylene oxide (EO) with ammonia. The chemical reaction also produces DEA and TEA.

Domestic MEA discussions and trades were assessed unchanged at yuan (CNY) 11,000-12,000/tonne ($1,818-1,983/tonne) EXWH (ex-warehouse) east China basis, according to ICIS.

For DEA, price discussions were assessed as stable at CNY11,800-12,500/tonne EXWH east China. The trades for bulk DEA lots were unchanged at CNY11,500/tonne DEL on cash-payment terms. The bulk DEA prices translated to around CNY12,000/tonne on a drummed basis.

TEA price discussions remained stable at CNY12,300-13,200/tonne EXWH east China.

Meanwhile, feedstock EO prices were being bolstered by the recent overall gains in upstream ethylene prices, market participants said.

“The EO prices have climbed higher because ethylene prices are very expensive. The second-half of January does not bode well for the amines market. Factories are closed earlier and the orders were already been completed in December,” another market participant said.

In eastern China, EO prices increased by CNY200/tonne during the week ended 22 January to CNY10,600/tonne, after having remained stable for several weeks at CNY10,400/tonne.

Ethylene spot prices in northeast Asia eased by $10/tonne at the high end to $1,520-1,550/tonne CFR NE Asia in the week ended 17 January, but they were stronger than the levels of $1,440-1,460/tonne CFR NE Asia seen four weeks ago.

During the week ended 10 January, ethylene spot prices in northeast Asia had increased by $20/tonne to $1,520-1,560/tonne CFR NE Asia – the highest levels last seen in 2008, driven mainly by tight regional supply ahead of a heavy cracker shutdown schedule in Japan and Taiwan in the first half of the year.

Meanwhile, with a burgeoning feedstock cost pressure, China’s amines demand is likely to be subdued against a backdrop of lacklustre economic data, the market participants said.

China’s economy expanded by 7.7% year on year in the fourth quarter of 2013, slowing from the 7.8% growth in the preceding quarter amid the slowdown in its industrial output, official data showed on 20 January.

The country’s GDP also grew at an average of 7.7% for the full year of 2013, marking the slowest yearly rate of growth in 14 years, according to data 
from the National Bureau of Statistics (NBS).

In December, China’s industrial production growth slowed down to 9.7% year on year from 10% in November. For the full year of 2013, industrial output expanded by 9.7% year on year.

Separately, investment bank HSBC announced that its preliminary manufacturing purchasing managers’ index (PMI) for China is at 49.6 for January, a six-month low and the first time the index has fallen below 50.0 since August 2013.A PMI reading above 50.0 indicates an expansion, while a reading below 50.0 represents a contraction in manufacturing activities.

Slowing demand is a major reason pulling down the January PMI, according to HSBC.

By Felicia Loo