CHUA Sok Peng, Managing Editor, Asia Petrochemicals | Feb 2013 Asian Aromatics 2013
Jan 12, 2015
CHUA Sok Peng,
Managing Editor, Asia Petrochemicals | Feb 2013
Asian Aromatics 2013
• Benzene: Late spike in 2012, correction in Q1 2013
• Styrene: Are current prices sustainable?
• Paraxylene: Surging despite downstream struggles
• Isomer-MX: Mixed signals
• Toluene: Still a gamble
2
Agenda
Asian Benzene-Naphtha spread
3
US demand drives BZ price in Asia, Europe
4
Benzene spiked in late 2012: China factor
New/Expansion of downstream capacities in China• H2 2012 - Bullish caprolactam and phenol markets in 2010/11 resulted
in a boom
• Supported by expanding nylon capacities
• Increase in demand of benzene/cyclohexane in China
• Increase in Chinese demand of benzene was unexpected
• Chinese imports of benzene increase from 12,000 mt in Aug to 40,000 mt in Sep and 76,000-78,000 mt in Oct/Nov and 64,000 mt in Dec
Now, China was expected to import more benzene in 2013. But buying appetite curbed by huge price gap of more than $70/mt between domestic and imported cargoes. Industry expects Chinese imports for benzene to stabilize at around 30,000 mt/month
Sinopec domestic benzene price stabilized at Yuan 10,600/mt ($1,415/mt) for the past few months. Chinese buyers will only buy if FOB K is not more than $1,400/mt or around $1,430/mt CFR China.
Benzene spiked late 2012: China factor
Low inventories of SM and benzene in China
• Styrene surge in Dec supported benzene market
• Long styrene Chinese traders like Caphill/Kyetong are supporting the SM market.
Aggressive short covering by traders
• Market structure flip into backwardation in June, market participants did not expect it to last so long
• Cargoes rolled over as traders expected prices of benzene to increase later but that did not materialize.
• Chinese traders continued to support the prompt prices as they sought to cover short aggressively. Buy prompt at high.
• Now, short traders have covered their positions by Dec at high prices. No support now from traders for short covering.
• Middle East typically supply benzene to US, but due to spate of turnarounds at styrene plants there, cargoes are making their way to Asia instead.
• Between January and March, around 30,000-50,000 mt of Middle East benzene moving to Asia as US prices falls on high inventory level.
• Most of the Middle East cargoes sold to China.
• China import just 8,800 mt of benzene from South Korea in Jan 2013, compared with 32,000 mt in Dec 2012.
Reverse trade flow: ME BZ heads to Asia
7
• Benzene: Late spike in 2012, correction in Q1 2013
• Styrene: Are current prices sustainable?
• Paraxylene: Surging despite downstream struggles
• Isomer-MX: Mixed signals
• Toluene: Still a gamble
8
Agenda
Styrene at record high on Jan 7, 2013
9
China domestic price contributes to surge
10
� Price gap between imported and domestically produced styrene monomer in China hit 11-month-high on Feb 18, dampening demand for imports and potentially restrict buoyant global SM prices.
� Spread between the two prices hit $67.70/mt on Monday -- the highest since March 29, 2012, when it was at $79.1/mt.
� The wide gap could potentially reduce demand for spot cargoes on a CFR China basis as it would be cheaper to buy from the domestic market.
� East China inventory level reached a low of 35,900 mt in the last week of September 2012, when the domestic price of SM was almost $130/mt above the CFR China price. The reverse price spread widened to as much as $259/mt on October 29, 2012. The CFR China price rose to become higher than the domestic price again only in late December 2012.
Fall in China domestic price caps imports
11
East China SM inventory, domestic price
12
• Benzene: Late spike in 2012, correction in Q1 2013
• Styrene: Are current prices sustainable?
• Paraxylene: Surging despite downstream struggles
• Isomer-MX: Mixed signals
• Toluene: Still a gamble
13
Agenda
PX continues to rise on strong demand
14
PX surge shows little regard for PTA
15
PX ACP no longer a safe haven for PTA
16
New PX capacities in Asia/Middle East
17
NEW PX CAPACITIES IN ASIA/Middle East
Dragon Aromatics Fujian 800 Jan-Mar
HC Petrochem Daesan 800 Jan-13
Fujia Dahua Dalian 750 SU in 2012?
PetroChina Sichuan 650 SU late 2012
Ulsan Aromatics Ulsan 1,000 May-14
Shell/Taiyo/GS Caltex Yeosu 1,000 end-2014
SK Innovation Incheon 1,300 late 2014
Samsung Total Daesan 1,600 Sep-14
SATORP Jubail 700 H2 2013
ONGC Mangalore Mangalore 920 2013 Apr
Jurong Aromatics Singapore 800 2014 June
Zhejiang Hengyi Brunei 1,500 2015
New PTA capacities in China
18
NEW PTA PLANT CAPACITIES IN CHINA
COMPANY LOCATIONCAPACITY (KT/YEAR) STARTUP
BP Zhuhai Zhuhai 200 Feb
Hengli Dalian 2,200 Sep-Oct
Hengli Dalian 2,200 Early 2013
Tongkun Zhejiang 1,500 Aug
Zhejiang Yisheng Hainan 1,800 Nov-Dec
Yisheng Dalian 1,500 Nov-Dec
Xianglu Xiamen 1,500 Q1 2013
Total 10,900
0
1000
2000
3000
4000
5000
6000
7000
2008 2009 2010 2011 2012
PX
PTA
China PX, PTA imports
19
Trend in 2013
• PX price moved up sharply 2012 on tight supplies after PTA plant start ups. This trend will likely end in 2013 due to startups of new PX plants (HC Petrochem, Dragon Aromatics). Price decline to likely start from mid-2013.
• In addition, PTA plant runs lowered amid negative margins, creating excess PX supplies in the market.
• The CFR China PTA price is relatively stable currently because of lower plant runs. But in 2013, PTA price will plunge following a series of startups of new PTA plants in 2012. Domestic PTA and imported PTA price gap widens to $60/mt in 2013, compared to $30/mt in 2012.
• Textile sales remain bearish in China. Cotton prices artificially high. Huge clothing inventory: Even if all of China’s clothing industry comes to a halt for 1 year, there’ll still be enough clothes to house every Chinese for 3 years – China National Garment Association
• Benzene: Late spike in 2012, correction in Q1 2013
• Styrene: Are current prices sustainable?
• Paraxylene: Surging despite downstream struggles
• Isomer-MX: Mixed signals
• Toluene: Still a gamble
21
Agenda
Isomer-MX-Naphtha spread grows
22
Isomer-MX: US arb closed since Q4 2012
PX-MX spread widening
24
• Expectation: MX to be tight in 2013 due to start up of HC Petrochem’s PX plant in South Korea and TenglongAromatics in China.
• Reality: HC Petrochem operating at just 70%, Tenglongstill not started up due to feedstock, environmental issues
• Expectation: Closure of US-Asia arbitrage will spur demand
• Reality: Asian demand weakens. Taiwan not buying MX as PX demand is weak due to poor PTA
Isomer-MX: Mixed signals
25
• Asia structurally short of MXAround 800,000 mt to 1 million mt/year of MX supplied by the US
• ‘Shale gas boom’ in the US worsens Asian MX marketUS/Asia isomer-MX arbitrage has shut since Nov 20 2012 until now due to rising US MX prices
• Rising term contract prices – up $4-10/mt premiumFOB Korea: GS Caltex offer at $10/mt premium in 2013, compared to $5-6/mt in 2012SK Global Chemical offer at $6-9/mt premium
CFR Taiwan: Formosa buys at about discount $3-4/mt (2013), discount $24-28/mt (2012)
Outlook: Isomer-MX Supply to remain tight
26
Asia capacity
75% 2,400,000 mt/year
US/Asia MX25%
800,000 mt/year
<Asia isomer-MX market size>
• Benzene: Late spike in 2012, correction in Q1 2013
• Styrene: Are current prices sustainable?
• Paraxylene: Surging despite downstream struggles
• Isomer-MX: Mixed signals
• Toluene: Still a gamble
27
Agenda
Toluene: Price correction after end 2012 surge
28
China replenishing toluene
29
30
Benzene-toluene spread encourages TDP
31
• SEA already tighter in 2013 because of lesser Thai PX supply
• Exports to India may increase due to tax change, making SEA-origin volumes more competitive to South Korea (on top of freight advantage) in Asia.
• Europe, which can also deliver volumes to India (and did so in December), will also have to compete with this tax advantage.
Example:If FOB Korea and FOB SEA price is $1,300/mt,
2-3kt freight S. Korea to India: $72-78/mt (PC641 Jan 8 2013)
3kt freight SEA to India: $45-53/mt (PC642 Jan 8 2013)
CFR India (Korea-origin): 1,372*1.025= 1,406.30/mtCFR India (SEA-origin) $1,345*1.000= 1,345/mt
Southeast Asia and India toluene in 2013
32
India import tax 2012 2013
ASEAN (excl. Philippines) 2.00% 0.00%
South Korea 3.13% 2.50%
Thank You!CHUA Sok Peng
Managing Editor, Asian Petrochemicals