Asian aromatics at record high prices on tight supply, speculation
Singapore (Platts)--13Dec2012/837 am EST/1337 GMT
Asian aromatics hit all-time highs this week on shrinking supplies and
rising feedstock costs. Toluene and styrene monomer spot prices set new
records Wednesday, assessed at $1,388.50/mt FOB Korea and $1,674/mt FOB Korea
respectively while benzene was at a record high on December 5, closing at
$1,477/mt FOB Korea.
Year-on-year, benzene has the strongest showing, soaring $362/mt or
33.09% since January 3. This is followed by styrene, which rose $336.50/mt or
25.16% and toluene, up $278/mt or 25.03% over the same period.
Meanwhile, isomer-MX closed Wednesday at a four-and-a-half-year high of
$1,418/mt FOB Korea and paraxylene was assessed at a nine-month high of
$1,657/mt CFR Taiwan/China.
Article continues below...
|Request a free trial of: Asian Petrochemicalscan|
Asian Petrochemicalscan provides weekly market updates, commentary and assessments ranging from naphtha feedstocks to aromatics, olefins, and polymers in Southeast Asia, Korea, Taiwan and Japan.
Benzene can be derived from petrochemical reforming or distillation of
coal tar as a result of the steel processing.
Benzene prices are well supported due to falling supply. In the US,
supply is estimated to have been reduced by around 25% this year as
refineries are now cracking lighter feedstocks with lower aromatics yields.
Due to its free trade agreement with Canada, the US can only import styrene,
a benzene derivative, from its northern neighbor. As such, it has to keep
importing benzene to produce the monomer.
Over in China, coking benzene output from steel mills has fallen around
50% this year due to poor steel demand in the country.
On the other hand, new solvent and caprolactam capacities are starting
up in China in 2013 and anticipated demand for benzene is estimated at more
than 1 million mt/year.
As benzene prices firmed, Asian producers are seeking to increase
production via toluene disproportionating methods, which in turn sent toluene
to a record high.
The monomer comprises 80% benzene and 30% ethylene. With benzene surging,
styrene prices have been rising but producers are barely breaking even as
demand for styrene derivatives is weak as the cold weather approaches.
Demand for expandable polystyrene, used in the construction industry,
will fall significantly in winter and record high styrene prices are not
enticing buyers, industry sources said.
Polystyrene demand is also sluggish, particularly for high impact
polystyrene, producers said. Producers such as South Korea's Kumho
Petrochemical have slashed operating rates in November-December to around
65-70% as the cost of SM is considered too high and demand remains low.
Toluene is well sought after as a feedstock for TDP and hydrodealkylation
units that produce benzene. It is also fed into MTPX units to produce
Supply is shrinking in Southeast Asia as Thai Paraxylene, which is able
to produce 144,000 mt/year of toluene, will stop offering spot cargoes
staring early 2013. This is because Thai PX is expanding its PX and benzene
units at Sri Racha and will use all of its toluene as feedstock.
As a gasoline blendstock, toluene is closely monitored especially since
China will start levying a consumption tax of Yuan 1/liter or Yuan 1,364/mt
($217/mt) on liquid petrochemical products starting January 1, 2013.
The tax is targeted mainly at MTBE and mixed aromatics and it will raise
the cost of gasoline blending. Consequently, toluene could end up being the
preferred blendstock, thus reducing its availability as a petrochemical
While aromatics prices are firming on tight supply, speculation by cash
traders in China has also contributed to price hikes. Cash traders are
described as second- or third-tier traders who are unable to secure bank
loans so they have resorted to buying imported products and re-selling them
in the domestic markets to raise cash.
These traders are disengaged from the product chain and the money they
raise from selling the commodities is re-invested into the property or stock
markets for quick gains.
The presence of cash traders in the Chinese market has resulted in
severe price distortion, according to a Sinopec source.
"They don't look at production costs at all and have very little
understanding of the commodity markets. If they go bust, they'll just start
up a new company and do it all over again," he said.
--Chua Sok Peng, email@example.com
--Edited by Alisdair Bowles, firstname.lastname@example.org