Petrochemical prices in Asia expected to firm post Lunar New Year holidays

31-Jan-11

Petrochemical prices in Asia are expected to firm after the Lunar New Year holidays, on strong Chinese demand for polymers and styrene that will keep naphtha values buoyant, as per ICIS. A general slowdown is seen in trading in the region during the week-long Lunar New Year festivities in China, which fall on 2-8 February this year. However, in a sign of sustained downstream demand, feedstock naphtha prices soared past US$865/ton CFR Japan for the front-month contract. Though demand is strong for petrochemicals and naphtha, a weak European (naphtha) market weighs on prices in Asia. China’s polyethylene (PE) and polypropylene (PP) prices are expected to rise further post-holidays, on restocking activity. Tight supply of styrene will continue to boost monomer prices- China’s downstream styrenic expansion at around 2 mln tons was five times larger than the expected 400,000 tpa increase in styrene monomer production this year. Additionally, Mitsubishi Japan’s move to permanently exit styrene monomer business in Japan this April will further tighten supply. In line with robust benzene values, styrene prices were assessed as US$1380-1400/ton CFR China last week, rising from US$1365-1375/ton CFR China a month ago, ICIS data showed. Asian benzene prices scaled up to a 28-month high this week, bolstered by a rally in European prices. Market players in Asia were prompted to fix arbitrage benzene shipments to Europe where plant shutdowns, mainly unplanned, led to a regional supply crunch, traders said. A trend of tight supply reigns for other polymers: Asian PP supply would be tightened from February to May because of a string of regular maintenance works in the Middle East and Asia. Formosa Chemicals and Fibers Corp (FCFC) plans to slash output at its 450,000 tpa polypropylene (PP) facility at Mailiao in Taiwan to 60% in March due to a shortage of on-site propylene (C3) feedstock, as its feedstock supplier Formosa Petrochemical Corp (FPCC) would be shutting one of its residual fluid catalytic crackers at Mailiao for maintenance. Also, dwindling supply and rising costs of feedstock propylene (C3) may soon push Asian acrylonitrile (ACN) prices to US$2500/ton, the highest level since May 2010.