MELBOURNE (ICIS)--Spot butyl glycol (BG) prices into China may extend gains after reaching an 11-month high on the back of a post-holiday domestic market rally, market participants said on Thursday.
China BG prices have amassed 19.7% of gains in the 13 weeks ended 12 October to settle at an average of $1,017.50/tonne CFR (cost & freight) China on a zero antidumping duty (ADD) basis, subject to import duty, according to data compiled by ICIS. The mid-point of the price also re-entered the four-digit territory for the first time since November 2015, ICIS data showed.
The strong performance of the China BG market has taken some market participants by surprise, defying an earlier expectation of a feedstock cost-driven price pullback. Domestic BG prices roared to the highest level for 2016 even as ethylene and propylene further upstream eased off the recent highs.
Back in September, the steep downturn in ethylene prices had fomented a weak outlook for the prices of raw material ethylene oxide (EO) in China, prompting a small number of Chinese BG importers to expect a corresponding softening in BG prices this month.
However, the reality of limited product availability sparked a renewed domestic BG price escalation at the reopening of the China market this week.
Spot prices of imported BG in east China leapt to yuan (CNY) 9,700-9,800/tonne ex-tank from CNY9,100-9,200/tonne ex-tank on 28 September. Offers prevail at a minimum CNY10,000/tonne ex-tank.
The prices in south China soared to CNY10,000-10,100/tonne ex-tank as at 12 October from CNY9,400/tonne ex-tank on 28 September.
The prices were not assessed on 5 October because of the closure of the China market for the National Day holiday.
“No-one could have foreseen this kind of prices, in view of the depressed prices in the first half of the year,” a Chinese BG importer said.
CFR China BG prices may head higher still, as the strong post-holiday domestic BG market gains bolster international producers’ selling targets, some importers added.
“International producers will undoubtedly raise their price expectations again to capitalise on the strongest China market in almost a year,” a separate Chinese importer said.
For material that is exempt from China’s 5.5% import duty, a South Korean producer’s selling target advanced to $1,150/tonne CFR China, the equivalent of $1,090/tonne CFR China for dutiable material. The new selling target represents a $110/tonne hike on its last concluded deal.
For deep-sea BG that is subject to antidumping duty (ADD) and import duty, a US producer’s selling target strengthened to $1,070-1,075/tonne CFR China (zero ADD basis, subject to import duty), following recent sales at $1,030-1,050/tonne CFR China (zero ADD basis, subject to import duty) for October and November shipment.
Chinese importers’ limited inventories, along with unstable output by domestic BG maker Dynamic (Nanjing) Chemical Industry in recent months, has contributed to the snug supply of BG in China in early October.
Limited cargo supply from Dynamic and importers’ tight inventories have facilitated importers’ successive domestic price increase proposals. Some importers commented that the recent domestic price uptrend appears to have been driven by importers’ price push, and not by domestic producers’ price initiatives.
However, the bullish momentum in the domestic BG market is unlikely to endure, the first importer cautioned.
Chinese importers’ inventories are expected to be replenished by the late October/early November arrival of fresh shipments, mainly from deep-sea sources. Given the anticipated gain in forward supply, it is unrealistic to expect domestic prices to maintain the strong upward momentum seen in recent weeks, the first importer added.
China, Asia’s biggest importer, purchased 102,547 tonnes of BG from abroad between January and August 2016, a 17.1% increase from the first eight months of 2015, according to the country’s Customs data.
BG, derived from ethylene oxide (EO) and NBA, is also known as ethylene glycol ethers (EGE).
Picture (top): BG is used in cosmetics (Image Source/REX/Shutterstock)
Focus article by Trisha Huang