London — Physical naphtha values in Europe fell last week, tracking crude prices lower, even as a stronger gasoline complex translated into appreciating values across blending grades of naphtha.
FEEDSTOCK
Market sentiment points towards a tighter supply and demand balance should spot buying interest pick up, but thin demand from the region’s petrochemical sector in the first half of August presents a threat to this becoming a reality.
OLEFINS
The ethylene market is currently seen as well supplied but there are expectations of tightness on the horizon as a few crackers undergo maintenances in the August-September period. The European ethylene contract for August settled at a rollover from July at Eur1,135/mt FD NWE, sending flat indications to downstream products.
Propylene supplies are set to remain tight this week as spot prices hold at a premium to the August contract price. Developments in the Asian market are set to be the focus of attention in the butadiene market this week, as European market sources look to assess potential arbitrage opportunities.
AROMATICS
The European benzene market will likely remain illiquid as August is still seen as long, resulting in a steeper contango developing at the front of the curve. Supply factors in the form of low Rhine water levels and a narrow premium over toluene could help to balance the market, but sources remain apprehensive over any large shift in fundamentals.
The European August styrene contract price settled up Eur20/mt last week, which has set a bullish tone for the market this week. Styrene spot prices increased on the back of a rise in Asia and traders will be looking to work exports to Asia.
Hot weather will continue affecting toluene with both logistics and production likely to bring more headache. Some refineries have had to reduce run rates amid inability to cool down crude distillation columns. MX demand is expected to remain strong as European PX producers continue to run hard to meet the demands of downstream PTA producers.
The past week has seen large increases in global PX prices driven by Asia. In the OX market, with two PA plants in turnaround this week, there is a suggestion that the tightness seen in recent weeks may ease.
POLYMERS
The polyethylene market is well supplied for most grades, which along with bearish feedstock has been weighing on the prices of various grades. HDPE is the only grade expected to remain tighter in the market because of production issues faced earlier by a producer.
The rollover in ethylene contracts has led to European producers attempting the same for the PVC August CP. Buyers smell blood and are pushing for a reduction, with the claim of high margins as continued justification. Exports are minimal due to a silent Turkish market and European availability is set to increase with the arrival of American imports, adding more downwards pressure to an already soft market.
Polystyrene producers will be keen to increase PS prices amid the feedstock rise. However, PS demand is expected to slow in August due to the seasonal summer lull. In polypropylene, market players expect prices to remain stable despite a small increase in the propylene August contract price.
INTERMEDIATES
The methanol market continues to watch water levels on the Rhine and the impact on logistics. Sources said the summer holiday lull in demand has helped to mitigate the impact of declining Rhine levels. Oxo-alcohols supply availability in Europe is set two improve following two major producers lifting force majeure on 2-EH and butanol supplies.
MTBE
Rhine levels have become the pressing concern for the MTBE market, with barge capacities heard to be shrinking along with water levels. Logistics will be upset, with barges hard to come by and a pronounced risk of cancellation attached to booked vessels. Spot trade has been liquid and the strength of the market has fluctuated, but prices are likely to increase as orders become harder to fulfill.
