Contracts
December contract discussions are yet to begin. Initial commentary indicates another decrease is likely, considering the decreasing spot prices in Europe and the dominant Asian market.
The November contract price was agreed at €1,053/tonne FD NWE, down €83/tonne compared with October. The fall was a result of lower Asian and European spot prices in October and early November.
The December Asian Contract Price (ACP) nominations are due in the week commencing 14 November. The November ACP from majors MEGlobal, Shell and SABIC was published at $1,380/tonne, $1,400/tonne, $1,400/tonne CFR Asia, respectively.
Upstream
Ethylene supply is now more closely aligned to demand as a result of sizeable cutbacks to cracker operating rates. Demand is not expected to show any recovery in 2011, but sources are not anticipating any significant downward changes in demand levels for the remainder of the year either. Sellers are under much less pressure to remove unwanted tonnes and spot price ideas are slightly firmer as a result. The November contract settled down by €20/tonne, at €1,095/tonne FD NWE. December contract discussions will get underway in the next couple of weeks.
The ethylene oxide (EO) market continues to be balanced, and both formula-related and freely negotiated November contracts have been concluded down by €16/tonne, to €1,212-1,379/tonne FD NWE and €1,252-1,409/tonne FD MED for November respectively. Demand is good and mostly seen to be bearing up quite well in the current economic climate.
Downstream
Buying power is limited because of financial insecurities. Polyethylene terephthalate (PET) suppliers are fighting to maintain margins following an €80/tonne drop in production costs from October to November. The fall was €10-20/tonne greater than sources had anticipated at the beginning of November. European product is currently on the market at €1,250-1,300/tonne FD Europe.
Antifreeze consumers are not calling off as much as they normally would at this time of year. One source said demand was slow to non-existent.
Spot bulk
The spot bulk price range has been assessed at €780-820/tonne CIF NWE, representing the sentiment in the market towards the end of the week. Commentators were hard-pushed to pinpoint prices, highlighting the uncertainty brought about by the bearish global macroeconomic situation and the pressure to offload inventories by the end of the year, as per usual.
It emerged this week that sub-€800/tonne was already on the cards at the beginning of November, so while this came as a shock to some players this week, others were aware of the situation.
Significant volumes (over 2,000 tonnes) of local material are reportedly on offer at €750/tonne, yet even at this price, there were no sales reported. There was no confirmation from the sell side that this price was in the market.
A seller is more likely to prefer selling a high volume at a small premium than try to find multiple buyers for truck loads, sources agreed. This would explain a sharp drop in the offer price.
A PET producer said this level of spot pricing is interesting even if the product is not required immediately because of the spread below net contract. Buyers in general are not interested in accumulating material and domestic producers are understood to have plenty to offer. MEG producers are still making margins and are therefore pressured into absorbing the ethylene that would otherwise end up in less profitable sectors, sources said.
At the other end of the scale, a reseller said it bought 1,000 tonnes back to back at €840/tonne FOB for November delivery at the beginning of the week, selling it on at €875/tonne. This is considered to be significantly above the market price and was not confirmed as details were private and confidential.
Of interest, a 1,000-tonne, first-half-of-November deal was reported by a buyer this week, but concluded late on 4 November, at €850-860/tonne.
Spot trucks
The truck market was more controlled than bulk and prices underwent a sedate decrease. Activity took place within the range €840-870/tonne FCA RDAM. Just below and above this was mooted and a couple of sellers did not agree with the low end of the range.
Russia
Russia's MEG spot rouble (Rb) prices are steady this week at Rb48,000-52,000/tonne EXW. The country's major suppliers refrained from pre-winter seasonal price increases, citing external downward pressures. Discounted MEG sales by Kazanorgsintez and Nizhnekamskneftekhim are said to have had a moderate impact on domestic prices. Russian domestic numbers include 18% VAT.
Asia
Asian MEG prices fell further this week as sentiment remained bearish. The weak conditions in the downstream polyester market in China and lingering concerns about the eurozone debt crisis drove prices down to $1,100-1,120/tonne CFR China Main Port.
Production
Clariant’s EO/MEG facility at Gendorf, Germany, restarted as planned on 7 November after its two-week planned outage, a company source confirmed. The unit has been down since 22 October. Nameplate capacity for EO equivalents is approximately 240,000 tonnes/year.
INEOS Oxide’s 220,000 tonne/year EO unit at Lavera, France, was scheduled to commence its four-week outage on 7 November.
Taiwan’s Nan Ya Plastics plans to restart its 360,000 tonne/year No 1 MEG plant and 360,000 tonne/year 3 unit in the second half of November. The restart at its No 3 unit was brought forward from its initial plan in late November. The two units, which are located in Mailiao, were shut on 8 September and 7 October, respectively, for a turnaround.
Eastern Petrochemical (SHARQ), a joint venture between SABIC and a Japanese consortium led by Mitsubishi Chemical, is planning to shut its 450,000 tonne/year No 2 unit in December for around 10 days and its 450,000 tonne/year No 3 plant in mid-November for around 10 days.
Spot bulk
A confirmed 500-tonne November diethylene glycol (DEG) deal took place at €700/tonne CIF ARA. A second deal was recorded on a free on board basis at €755/tonne, according to a second buyer who calculated the CIF price to be below this.
There were also reports of offers at €710-720/tonne earlier in the week and it remains unclear whether this material has been sold.
Spot trucks
The spot truck market is slightly weaker than in previous weeks, prompting the €20/tonne drop on the high end to €880-920/tonne FD NWE.
Asia
DEG prices in Asia continued to decline to $1,000-1,030/tonne CFR China Main Port for the week ended 11 November, because of abundant supply and continuous drops in co-product MEG. There are reports of 2,000 tonnes of DEG destined for Asia from Europe.
($1 = €0.74)
(€1 = £0.85)
(€1 = Rb41.60)
This week in ICIS: www.icis.com
10/11/2011 06:53 CPC Corp to drop term PX exports for 2012 on higher domestic sales
10/11/2011 04:00 India PTA, MEG supply deficit to sharply grow in a decade
09/11/2011 15:46 INSIGHT: Europe and Asia face cracker cull
09/11/2011 07:52 China polyester staple fibre producers cut production on weak demand
The 10th European Aromatics & Derivatives Conference
22-23 November 2011, Amsterdam
http://www.icis.com/europeanaromatics
