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Petrochemical prices fall linked to new Chinese capacity

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Petrochemicals prices - 2 EH, NBA - see a sharp decline in the light of on new Chinese capacity. …

Petrochemicals prices - 2 EH, NBA - see a sharp decline in the light of on new Chinese capacity.
What does thi mean for future prices and availability?

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  • Is there any analysis on the shrinking spread , what % can be attributed to rising Propylene demand / rates . At 30 USD /mt spread what would be the consequences on newly built plants in the medium terms ?
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  • 1. © 2013 Platts, McGraw Hill Financial. All rights reserved. 2-EH, NBA see sharp decline in prices on new Chinese capacity Singapore, April 17, 2014 Additional media contact: Elizabeth Catalano at elizabeth.catalano@platts.com or +44 207 176 6024.
  • 2. Sharp decline in prices on new Chinese capacity • Asian 2-ethyl hexanol prices averaged $1,426/mt CFR China in the first quarter of 2014, down 10% from a similar period in 2013, Platts data showed April 3. • Asian 2-EH prices had averaged $1,584/mt CFR China in Q1 2013. 2
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  • 4. Drop in margin for producers who lower operation rates • In contrast, propylene, which acts as a feedstock for 2-EH, averaged $1,396/mt in Q1 2014 up $88/mt or 6.3% from from a similar period in 2013. • A drop in 2-EH prices along with a rise in feedstock propylene prices led to a steep drop in margins for 2-EH producers who have resorted to lowering of operation rates or using the product for captive consumption. • The 2-EH/propylene spread stood at $30/mt in Q1 2014 more than nine times lower as compared to $276/mt in a similar period in 2013, Platts data showed. 4
  • 5. LG Chem shut its Yeosu based plant for most of march • "The fall in 2-EH prices and margins in the first quarter came even as two 2-EH prominent producers who sell into the Asian spot markets kept their plants shut for maintenance. Furthermore, several small producers in China ran their plants at an average of 60% of capacity," a Chinese trader said. • South Korea's LG Chem had shut its Yeosu based 150,000 mt/year plant and Hanwha Chemicals had kept its 100,000 mt/year plant also based in Yeosu shut for maintenance for most of March. • Both these plants are currently running at full capacity. 5
  • 6. DOP demand has dropped in recent years • About 75% of 2-EH in Asia is used in making plasticizer dioctyl phthalate, or DOP, demand for which has dropped in recent years. • This is because the use of DOP is banned in the production of toys in the US and the EU, and Asian toy manufacturers are starting to follow suit. • DOP prices averaged $214/mt in Q1 lower $214/mt, or 12% from an average of $1,751/mt in Q1 2013. • Prices of normal butanol, which is produced along with 2-EH and uses the same feedstock propylene in swing plants across Asia, averaged $1,206/mt in Q1 2014 down $263/mt or 22% from Q1 2013. 6
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  • 8. New Chinese capacity applying pressure on prices • China saw coming onstream of new capacity of 800,000 mt/year each of 2-EH and NBA over the past six months. • The country is expected to see a total of about 1 million mt/year each of new 2-EH and NBA capacity by mid-June. • "China was the prime import market 2-EH and NBA till the end of 2013. Since 2013 it has become increasingly self sufficient. The country has begin exporting these products," a Chinese producer said. • According to sources, China's state-owned Tianjin Soda is in talks to sign term contracts for 2-EH and NBA cargoes with buyers globally 8
  • 9. New Chinese capacity applying pressure on prices (cont…) • The company doubled production capacity at its oxo-alcohols plant at Binhai Industrial Area in September and dedicated most of the additional capacity to exports. • The company's Binhai swing plant currently has the capacity to produce 280,000 mt/year of 2-EH, 170,000 mt/year of normal butanol and 50,000 mt/year of isobutyl alcohol. • Tianjin Soda built a pipeline linking its plant to Tianjin port in June 2011. • It began exporting cargoes in January 2013 as Chinese domestic markets grew increasingly oversupplied 9
  • 10. Sharp decline in Chinese imports • The falling demand for 2-EH and NBA is reflected in Chinese 2-EH import figures that have slid sharply over the first two months of 2014. • China imported 32,323 mt of 2-EH in January and February down almost 54% year on year from a similar period in 2013. • The country imported 46,744 mt of NBA in January and February down 38% year on year from Q1 2013. 10
  • 11. Click below to download the PDF 11 Click here to download
  • 12. © 2013 Platts, McGraw Hill Financial. All rights reserved. 12