JAPAN CRISIS: Firmer aromatics prices expected on slashed output

Singapore (Platts)--14Mar2011/631 am EDT/1031 GMT

Aromatics prices are expected to firm as Japan's aromatics production has been curtailed as result of the massive earthquake that struck on Friday last week.

Emergency shutdowns were carried out Friday at several aromatics plants across the quake-stricken northeast region.

JX Nippon Oil & Energy shut its aromatics units and refineries at Sendai, Kashima and Negishi, which have a total benzene capacity of 425,000 mt/year.

At Sendai, JX Nippon operates a continuous catalytic reformer, which has a capacity of 30,000 b/d, while a sulfolane unit can produce 90,000 mt/year of benzene and 300,000 mt/year of mixed xylenes. At Negishi, up to 145,000 mt/year of benzene can be produced from reformate while Kashima has a 190,000 mt/year benzene unit. Until the quake, the aromatics plants were running at 100% of capacity.

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At Chiba, JFE Chemical has shut its coal-based aromatics plant, which can produce 120,000 mt/year of benzene and an estimated 36,000 mt/year of toluene and 40,200 mt/year of solvent-grade mixed xylenes.

A JFE source was unable to provide further details of the shutdown, as the company was still in the midst of collecting data on the damage caused to the facility.

As of Monday afternoon, May bids for benzene were as high at $1,175/mt FOB Korea, about $10/mt higher from deals concluded at $1,165/mt on Friday last week.

Nevertheless, JFE Chemical's shutdown of its aromatics plant in Chiba will take out production of about 36,000 mt/year of toluene.

But traders in Asia noted that the quake's impact on toluene would be more indirect compared with other aromatics, as most of the plants that shut did not produce toluene. "[There's] no real toluene plant in northeast Japan," said a trader.

Despite a fairly consistent supply situation, some traders felt toluene prices could still firm on higher downstream demand.

On Monday morning, the toluene curve flattened as bids and offers in the earlier laycans rose while those for the later laycans fell. The FOB Korea marker gained $6/mt to $1,042.50/mt compared with Friday. Friday's toluene price was unchanged from Thursday despite the quake.

"Paraxylene prices fly, mixed-xylene prices fly, if C2 is short, styrene monomer prices go up, then it will push benzene, and toluene disproportionation operations will run," said a trader. Firm prices could also delay near-term planned turnarounds, boosting demand for toluene in the spot market.

Gasoline-blending could also increase, due to "the lack of fuel such as diesel, gasoline," said a trader.

Since Friday, a fire continues to burn at Japanese refiner Cosmo Oil's 220,000 b/d Chiba facility at Tokyo Bay.

"The top priority in Japan is to produce more gasoline. The government has advised the refineries to do so," said a Japanese trader. "I may need to buy spot cargoes or from other countries to cover my contracts as my inventory is low," the trader said.

With power cuts and downed phone lines, aromatics producers were still trying to ascertain the full extent of the earthquake's impact on their respective plants.

On Monday, a source at Maruzen Petrochemical was unable to comment on its 130,000 mt/year hydrodealkylation unit and aromatics plant at Chiba. The plant can produce of 200,000 mt/year of benzene, 85,000 mt/year of toluene and 72,000 mt/year of solvent-grade mixed xylenes.

Meanwhile, the isomer-MX market was active Monday morning with several bids heard for both April and May cargoes despite the dearth of sellers in the market. "With all this going on, MX will be short," said a Singapore-based trader.

It was unclear if the Cosmo Oil fire will affect the company's plan to start up its new 300,000 mt/year MX plant at its Yokkaichi refinery, central Japan, in November 2011.

Cosmo Oil's subsidiary, CM Aroma, runs a 270,000 mt/year MX plant at Chiba, eastern Japan, but the operational status of the plant could not be confirmed.

Also unclear was the situation at four styrene monomer plants located in Chiba and belonging to Idemitsu Kosan, Nihon Oxirane, Chiba SM and Denki Kagaku.

Idemitsu's 210,000 mt/year plant at Chiba was confirmed to be "running as normal" Monday, a company source said, although he could not reveal the plants' operating rate.

The other SM producers could not be reached.

--Baoying Ng, bao_ying_ng@platts.com
--Joycelyn Chua, joycelyn_chua@platts.com
--Gustav Holmvik, gustav_holmvik@platts.com
--Clement Choo, clement_choo@platts.com