Europe CX supply tight on global constraints

20 June 2017 13:21 Source:ICIS News

Europe CX supply tightLONDON (ICIS)--The European cyclohexane (CX) market has faced some interesting events so far this year, with continued tightness on the back of global supply constraints.

The closure of SABIC’s Wilton facility in the UK caused a gap in the market in January, with the market now more reliant on imports. However, amid a number of production problems leading to outages outside of Europe, supply has varied throughout the year but tightness remains strong.

At the start of the year SABIC closed its UK facility, which had a nameplate capacity of 330,000 tonnes/year, according to ICIS data. The site was said to have been running at approximately 195,000 tonnes/year before it closed, according to sources.

At the same time there were already issues impacting the movement of local product and imported material in Europe, including low Rhine water levels in Germany, and an unconfirmed outage in the Netherlands.

The market was very tight coming into 2017 and there was a slight month-on-month decrease in imports. However, on a year-on-year basis imports in January more than doubled, according to Eurostat data published earlier this year.

In addition to this, imports doubled in March, compared to the same period in the previous year, according to Eurostat data. This data suggests that both European and non-European producers were more focused on business in this region and its lack of supply in the first quarter.

As a result of this tightness, the second-quarter CX contract delta settled at €143/tonne, an increase of €11/tonne from the previous quarter.

Although supply remained tight in the second quarter, it began to ease slightly in April with product being more readily available on the spot market than it was at the start of the year, according to sources.

However, toward the end of the second-quarter there were a number of outages outside of Europe, adding to supply constraints and causing issues for buyers. Planned and unplanned outages were reducing supply in the US, Asia and the Middle East.

During this period some sources have called supply “short”, and noted that CX is tight globally. Last month, one buyer said:“This is the tightest situation I have ever experienced for my 18 years cyclohexane procurement career”.

The European CX supply shortage has sparked interest in traders new to the CX market, who hope to import material from the US into Europe in the near future.

The lack of availability of CX has had some effects downstream, but these are limited, a source said on Wednesday last week.

Both the European caprolactam (capro) and adipic acid (ADA) markets are in a period of tightness. ADA tightness is linked to a combination of CX supply constraints and strong demand from the downstream product nylon 6,6.

Similarly, capro stocks have been low while demand was seasonally healthy in the second-quarter. Coming into the third-quarter demand is expected to soften for capro and nylon, as it traditionally does during the summer period.

Negotiations for the European third-quarter CX contract delta are expected to be in full swing this week. The monthly CX contract price comprises the sum of the monthly benzene contract and the quarterly CX delta contract.

For players in the CX market it is uncertain when relief will arise. Although, one source expressed views that tightness should ease in June and July, at present the future of the CX market is unclear.

Increased imports attempted to fill the supply shortage, however, the European CX market has still not recovered from the closure of SABIC’s UK facility, and the further rationalisation in the region.

Focus article by Eashani Chavda

By Eashani Chavda