INSIGHT INTERACTIVE: August IPEX climbs on Asia surge, Harvey concerns

By Nigel Davis

LONDON (ICIS)–A 23.9% surge in ethylene prices in northeast Asia last month, and the downstream impact of the increase, helped lift the August northeast Asia ICIS Petrochemical Index (IPEX) by 6.8% and push the global index higher by 3.5%, the data showed on Tuesday.

Strong performance downstream lifted ethylene and butadiene prices. Local buyers and sellers reacted late in the month to the potential impact of Hurricane Harvey on US chemical production – it has been estimated that close to 50,000 tonnes a day of ethylene production was being lost at the peak because of the storm.

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But ethylene prices were climbing in northeast Asia through August as supply tightened and as a consequence of expected supply shortfalls in the China market.

Downstream demand for chemicals such as styrene and monoethylene glycol (MEG) helped buoy prices upstream. The more positive price environment was apparent across a wide range of upstream petrochemicals and intermediates.

The IPEX, which represents the regional price movements of a basket of 12 petrochemicals* weighted by capacity, has reflected this more positive price trend.

Buyers had geared up for a last push to supply downstream manufacturing and other markets this year. Sentiment played its part in driving prices higher.

Northeast Asia butadiene prices were up 16.7% month on month. Benzene prices were up 4.7%, toluene up 5.5% and styrene up 3.2%. At the end of the month, spot toluene prices were surging towards six-month highs on the back of China buying interest spurred on by demand in toluene disproportionation (TDI), itself driven by demand for benzene to make styrene. Toluene prices were much higher in the US over the month.

Asian styrene prices trended higher even though buyers were saying that it was hard to pass on increases.

In some respects, prices defied market expectations. Methanol prices in China, for instance, were pushed higher by the strong gains made by methanol futures even though concerns were mounting about the expected start up of new production capacity in Iran. Import prices hit a four-month high. The average price in August was up 4.7% month to month.

The potential impact of Hurricane Harvey outages on supply and demand and prices was widely apparent towards the end of the month.

On the ground in the US, it was hardly surprising that prices were moving sharply. US ethylene spot prices jumped in the wake of Hurricane Harvey.

However, there was little interest in front month August prices as Harvey approached and the August contract price (set retrospectively) was not settled.

Spot prices had been steadily climbing during August, ICIS reported, as the market anticipated the start-up of several new polyethylene (PE) projects, including a Sasol project in Lake Charles, Louisiana; a Dow Chemical project in Freeport, Texas; a Chevron Phillips Chemical project in Sweeny, Texas; and an ExxonMobil project in Mont Belvieu, Texas.

But the Harvey disruptions, and with limited liquidity for August material since the storm, the spot price surge at the time was not expected to have much influence on August contract prices.

The IPEX at the regional and the global level is subject to revision because of factors like this. The current IPEX values for August, therefore, do not include movements for the US ethylene contract price, for styrene and polystyrene contract prices and for the rollover of the July polyvinyl chloride (PVC) price.

The 12 petrochemicals and polymers in the basket are ethylene, propylene, butadiene, benzene, toluene, paraxylene, styrene, polystyrene (PS), polyethylene (PE), polypropylene (PP), methanol and PVC.

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