The Latest in Japan: This TDI outage is probably pulling Korean TDI into China and as a consequence spot TDI prices in other regions are moving up and product is short.
Japan's production woes in the wake of the 11 March disaster have nudged up prices of selected petrochemical products in Asia over the past three weeks and will likely continue to influence regional trades going forward, industry sources said on Tuesday.
Widespread damage to logistics infrastructure in the northeastern part of the country, and the consequent shortage of electricity as Japan grapples with a nuclear crisis in quake-hit Fukushima prevents domestic industrial plants, including petrochemical facilities, from running at full tilt.
Supply from Japan has been falling and regional demand is being beefed up as the country needed to compete for imported material, creating strong upward pressure on product prices. Most petrochemical plants in Kashima, which was near the epicentre of the 9.0-magnitude quake that triggered a massive tsunami, have remained shut, while others in the surrounding areas are gradually restarting operations.
In the butadiene (BD) space, April shipments from Japan had to be delayed or cancelled, compounding the tight supply of the product globally, market sources said. Spot BD prices increased by an average of $200/tonne or 7.8% since 11 March to $2,750-2,800/tonne CFR NE Asia on 1 April, according to ICIS data.
Price pressures were also strong in Asia's toluene di-isocyanate (TDI) market, with Mitsui Chemical's 120,000 tonne/year Kashima facility still not on line to serve the Chinese market, industry sources said.
The Kashima TDI plant will remain down until June, as the company preferred to keep the unit closed until after a scheduled maintenance.
TDI contract prices for April were expected to settle higher than the March contracts, which were mostly set at $2,600/tonne CFR CMP/Hong Kong by BASF and Mitsui Chemicals, market players said.
BASF has been seen offering April TDI contract at $2,750/tonne CFR CMP/Hong Kong early last week, they said. In the mono propylene glycol (MPG) market, meanwhile, Japan began competing for imported cargoes, exerting strong pressure for prices to move up, market sources said.
With the rolling blackouts in place in Japan, domestic MPG production could not satiate demand, they said. MPG pharmaceutical grade (PG USP) drummed values surged by an average $115/tonne or 5.5% over the past three weeks to $2,075/tonne CFR NE Asia, with southeast Asian prices tailing closely at an average of $2,025/tonne CFR SE Asia, according to ICIS.
Some Japanese buyers were heard willing to pay more than $2,300/tonne CFR NE Asia, desperate to secure cargoes to keep their downstream manufacturing facilities running, market sources said.
Others were even trying to procure supply from China through traders, they said. Deals for US-origin cargoes were heard at $2,050/tonne CFR NE Asia and cargoes from Korea were concluded at $2,100/tonne CFR NE Asia. Selling ideas for MPG were raised to $2,100-2,220/tonne CFR NE Asia, market sources said.
Japan was also seen making spot purchases in the Asian phenol market, changing its role from a net exporter of the material. Spot phenol prices jumped by an average $90/tonne or 4.9% over the past three weeks to $1,915/tonne CFR China Main Port (CMP), according to ICIS.
Mitsubishi Chemical, a major producer in the country, has yet to restart its phenol/acetone plant in Kashima. The plant can produce 250,000 tonnes/year of phenol and 150,000 tonnes/year of acetone.
In the Asian paraxylene (PX) market, in which Japan is a major supplier, prices spiralled by as much as $145/tonne three days after the earthquake (based on average daily prices) that shut three PX plants – one in Kawasaki and two in Kashima – owned by JX Nippon Oil.
But prices started to correct as traders said the price spikes had been overdone and supply was not too tight to warrant the sharp increase in prices.
Spot PX prices averaged $1,635/tonne CFR Taiwan on Monday, down 2.1% from 11 March, according to ICIS.
JX Nippon Oil's 350,000 tonne/year plant in Kawasaki had restarted, while the two units in Kashima with a combined capacity of 600,000 tonnes/year remained shut.
Meanwhile, spot prices for isomer grade xylene (isomer MX) surged by an average of $195/tonne or 17.8% since 11 March to $1,290/tonne FOB Korea on 4 April as Japan's production of the PX feedstock was severely disrupted, according to ICIS. Over the past two weeks, JX Nippon Oil snapped up at least 35,000 tonnes of isomer MX for April delivery and the company is expected to continue absorbing spot material in May, according to traders.
Japan continues to battle a nuclear crisis at its Fukushima Daiichi facility but is enjoying a brief reprieve on Tuesday (5 April) from blackouts of up to three hours that have been in effect since 14 March.
Forecast electricity demand for Tuesday is 35,000 megawatts (MW) against an estimated supply of 40,000 MW, according to Tokyo Electric Power Co (TEPCO), operator of the quake-ravaged Fukushima Daiichi nuclear plant.
