Market and product

SINGAPORE (ICIS)--Asian petrochemical prices are expected to firm after the Lunar New Year holidays, underpinned by strong Chinese demand for polymers and styrene that will keep naphtha values buoyant, traders said on Friday.

Trading usually slows down during the week-long Lunar New Year festivities in China, which fall on 2-8 February this year.

But in a sign of sustained downstream demand, prices for petrochemical feedstock naphtha soared to $865-868/tonne (€631-634/tonne) CFR (cost and freight) Japan for the front-month contract, according to ICIS. Naphtha prices were up a quarter from a year ago.

“Demand’s strong for petrochemicals and naphtha, although a weak European (naphtha) market weighs on prices in Asia,” said a trader in Singapore.

China, the world’s top energy guzzler, will continue to have a big appetite for petrochemicals, thanks to its galloping economy. Its GDP grew at a faster pace of 9,8% in the fourth quarter of 2010, while inflation slowed to 4.6% in December.

Overall, the world’s second-biggest economy grew by 10.3% in 2010, up from 9.2% in 2009.

China’s polyethylene (PE) and polypropylene (PP) prices were expected to rise further post-holidays, on restocking activity.

Meanwhile, tight supply of styrene would continue to boost monomer prices.

China’s downstream styrenic plastics expansion at around 2m tonnes was five times larger than the expected 400,000 tonne/year increase in styrene monomer production this year.

Moreover, Mitsubishi Japan will permanently exit styrene monomer business in Japan in April this year, a move that would further tighten supply.

Styrene prices were assessed as $1,380-1,400/tonne CFR China on Thursday, up from $1,365-1,375/tonne CFR China a month ago, ICIS data showed.

Prices ticked higher on the back of robust benzene values.

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.

Meanwhile, on other products, the trend of tight supply reigns.

Formosa Chemicals and Fibers Corp (FCFC) plans to slash output at its 450,000 tonne/year polypropylene (PP) facility at Mailiao in Taiwan to 60% in March due to a shortage of on-site propylene (C3) feedstock.

FCFC’s propylene supply would be reduced in March as its feedstock supplier Formosa Petrochemical Corp (FPCC) would be shutting one of its residual fluid catalytic crackers at Mailiao for maintenance.

Asian PP supply would be tightened from February to May because of a string of regular maintenance works in the Middle East and Asia.

Also, dwindling supply and rising costs of feedstock propylene (C3) may soon push Asian acrylonitrile (ACN) prices to $ 2,500/tonne, the highest level since May 2010.

“Naphtha crackers are still maximising their runs. Downstream margins are good,” said a trader in South Korea.