US-based RPM lifts fiscal Q4 net income by 54% on rising sales

26 July 2010 14:22  [Source: ICIS news]

LONDON (ICIS news)--RPM International increased its fiscal fourth-quarter net income by 54% year on year to $60.5m (€46.6m) on the back of rising sales, the US-based coatings and sealants producer said on Monday.
Net sales increased 13.3% to $971.5m from $857.3m in the same period last year, RPM said.

Operating profit was also up, by 23.7%, to $103.3m from $83.4m in the 2009 quarter, the company said in its earnings statement.

“Virtually all of our industrial and consumer businesses posted higher sales in the fourth quarter,” said CEO Frank Sullivan.

The company’s “bottom line” had benefited from a favourable product mix due to RPM’s diversified portfolio of companies, Sullivan added.

There had been better plant utilisation due to higher sales volumes, despite the negative impact of raw material pricing and availability, the CEO said.

Quoted from www.icis.com
($1 = €0.77)
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Less product, higher prices for Europe plasticiser buyers

26 July 2010 14:39  [Source: ICIS news]

By Libby George
LONDON (ICIS news)--European plasticiser buyers hoping for a summer respite to high prices and prevailing market tightness are now bracing for the opposite, market sources said on Monday. 
After last week’s force majeure declaration from BASF, market supply is set to contract even further, and all varieties of plasticiser are likely to get more expensive.
“The market is so short that if one supplier is out, the other suppliers cannot replace them,” one plasticiser buyer said. “Some companies will be very much in trouble.”
Dioctyl phthalate (DOP), di-isononyl phthalate (DINP) and other plasticisers are primarily to make polyvinyl chloride (PVC) soft and flexible for end uses ranging from pipes and cables to flooring, medical devices and toys.
This year – marked by low stocks, consolidated DOP production and a series of unplanned production outages – had already been tough for buyers, nearly all of whom have been on allocation for several months.
But after the 21 July BASF force majeure, end-use PVC producers are even more concerned than they were before about getting the plasticisers they need to produce – and passing on enough of the rising costs to maintain a decent margin. 
“Every month we are fighting to find material,” said another buyer. “I’ve never faced such a difficult situation in the plasticiser market.”
BASF made the declaration on DINP and three other varieties of plasticisers following an “unforeseeable technical defect” in its iso-nonanol (INA) plant in Ludwigshafen, Germany. The seller said it hoped to have the plant up and running in 14 days.
The outage could hardly come at a worse time for the market. For several months, demand has outstripped supply at such a fast clip that even sellers have expressed frustration with their inability to produce more. Meanwhile, a coming maintenance season – nearly every seller has a turnaround ranging from one to four weeks at some point in the August-October period – has forced them to hold back product from the market.
“A lot of customers could overflow us with inquiries, because in their need, they will take each and every kilo,” said one DOP seller. “I have not a single kilo for another customer.”
It has gotten so bad that some PVC compound sellers have not been able to meet their own commitments, and have sought to purchase either the end product, or feedstock plasticisers, from other sellers. Thus far, none contacted said they could spare either.
Imported material from Asia has served as a respite for some buyers, but it has come at a high price - €1,900-2,000/tonne ($2,451-2,580/tonne) for DINP, according to market sources. But traders said it is small amounts - not much more than 400 tonnes in total - and that a coming maintenance turnaround at a Taiwanese plant will further hinder imports.
Imported material “is definitely not disturbing the market and it is definitely not meeting demand”, one trader said.
While all market players had been hoping for the situation to balance out during the usually quiet summer period, the continual demands, and the BASF troubles, have dashed those hopes.
“It will be even worse than before…I’m afraid that prices will jump further,” one buyer said. “Just after the force majeure coming from BASF, [sellers] started talking about price increases.”
While prices were stable the week ended 23 July, it is likely the calm before the storm. Sellers are discussing hikes of €40-70/tonne for DOP, and potentially twice as much for DINP.
Meanwhile, prices for both products have already skyrocketed since the beginning of the year; both have climbed 66% above the average levels of January to €1,650-1,700/tonne FD (free delivered) NWE (northwest Europe) for DINP and to €1,525-1,575/tonne FD NWE for DOP, according to data from ICIS.
During the same period, PVC prices have risen roughly 15% for both spot and contract, to €810-840/tonne FD NWE for spot, with gross contract prices in the major German market at €1,040-1,070/tonne FD as of 23 July.
Plasticiser sellers, which in addition to BASF include Arkema, ExxonMobile, Oxeno, Oxea and Polynt, are quick to note that market tightness – and not speculation – has dictated increases. Additionally, every supplier has also examined postponing or rescheduling planned turnarounds, but in each case, they determined it was not possible.
“We have announced it since last year,” said one seller that said it found it “virtually impossible” to change its outage. “We cannot delay it or find another date.”
But such assurances are little comfort to buyers, who are bracing for what the prices will be – if they can even get material.
“Unfortunately for us, we are not as good at increasing prices as plasticiser producers,” one buyer said. “We lose margin every month. That’s really the problem.”

Quoted from www.ICIS.com

($1 = €0.77)
For more on DINP, DOP or PVC visit ICIS chemical intelligenceFor more on BASF, Arkema, Oxeno, Oxea and Polynt visit ICIS company intelligence
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Study questions long-only strategies in oil markets

As the chart above from Petromatrix shows, total US stocks of crude, gasoline, distillate and jet kero this year (red line) remain very over-supplied in the short term, by comparison with previous years.
A major reason for this is the move by pension funds to adopt long-only positions in the commodity future markets, in the belief that crude markets are fundamentally tight.

However, this week the Financial Times summarises a timely new study of commodity markets, by Prof Joelle Miffre of Edhec Business School. This argues that investors need instead to understand the difference between:

o Backwardation, "when commodity producers are more prone to hedge than commodity consumers", and the future price is lower than today's
o Contango, "when commodity consumers outnumber commodity producers, leading to excess demand", and the future price is above the current value

They recommend that "to earn a positive risk premium, investors should take long positions in backwardated markets and short positions in contangoed markets".

The team's research suggests this strategy would have earned the investor a commodity risk premium of 12% a year between 1992-2008. Whereas the long-only strategies currently followed by pension funds earned only 2% a year. Edhec therefore concludes that "passive long-only strategies as advocated by traditional indexers perform less well".

Posted by Paul Hodges on July 21, 2010 6:55 AM 

Quoted from: ICIS Blog

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Mideast naphtha heads for US, helps alleviate Asia glut

23 July 2010 08:22  [Source: ICIS news]

(Adds details, traders comments)
By Felicia Loo

SINGAPORE (ICIS news)--Around 300,000-500,000 tonnes of Middle East naphtha were booked to head to the United States next month, a move that would help alleviate the glut in Asia, traders said on Friday.
Much of the fixtures were on provisional bookings, but they were likely to be confirmed in the next few days, they said.

“The arbitrage to the U.S. from the Middle East may work out, as the U.S. could give a better netback,” said a trader.
Asian naphtha prices bounced higher on such arbitrage opportunities to offload excess supply, as demand in this region remained tepid, traders said.

The price spread between first half September and October contracts narrowed to a contango of $6.50/tonne from a contango of around $8 earlier in the week, while the naphtha crack spread against Brent crude futures ended at a 12-session high of $76.70/tonne on Thursday’s close, ICIS data showed.

“The Asian market has been greatly hit by Formosa’s cracker issues. So the arbitrage flows to the U.S. will help to cushion the impact,” said a trader, referring to demand heavyweight Taiwan’s Formosa Petrochemical Corp (FPC).

The company  had temporarily refrained from making spot naphtha purchases, following a cracker outage in Mailiao in early July, and it had even requested defer the deliveries of some term naphtha supply from August to December.

Formosa, whose 700,000 tonnes/year No 1 cracker would stay shut for two to three months since the blast on 7 July, was also seeking government approval to postpone the regular maintenance at the 1.03m tonne/year No 2 cracker at the same site. The No 2 cracker was originally scheduled to be taken off line from August 20-22.

The market welcomed the diversion of Middle East supply to the U.S. as Asia was awash in supply from an armada of imports from the Middle East recently, traders said.

On signs of a glut, onshore inventories of naphtha and gasoline in Singapore rose 591,000 barrels in the week ended 21 July to an eleventh-week high of 11.530 million barrels, according to Reuters quoting data from International Enterprise.

South Korea’s Honam Petrochemical bought 25,000 tonnes of open spec naphtha on Thursday at a discount of $10/tonne to Japan quotes CFR for second half of August delivery, up from $3/tonne on previous spot purchases, traders said.

But, on the other hand, shrinking petrochemical margins weighed on the market, with ethylene prices tumbling to $830-850/tonne CFR NE Asia this week, from $900-940/tonne a month ago and this squeezed the profitability, traders said.

“Fundamentally, nothing’s changed. The market is long on supply and worst, petrochemical margins are falling,” said a trader.

At naphtha prices hobbling near $660/tonne, the margins were in theory no longer feasible, as cracker operators typically require an ethylene-naphtha spread of at least $250/tonne to ensure profitability, traders said.

“At the rate things are going, cracker operators may have to consider curbing runs,” said one trader.

To discuss issues facing the chemical industry go to ICIS connect

By: Felicia Loo

< previous article(Iran’s Arya Sasol shuts down LDPE plant on technical issues)

quoted from ICIS News

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US benzene exports to Europe could balance Gulf supply

23 July 2010 20:44  [Source: ICIS news]

By Ryan Hickman

HOUSTON (ICIS news)--Up to 20,000 tonnes of US Gulf benzene is headed to the European market in response to production issues, sources said on Friday, potentially evening out the length in the US that has suppressed prices this month.

An outage at a major European production facility opened the arbitrage opportunity in the Atlantic basin and jolted prices upward in both regions on 21 July.

"That's an easy prey for the trade," a US source said, referring to traders looking to capitalise on volatility.
A source said that 15,000-20,000 tonnes of benzene fixtures were secured for the European market.
Other US market players generally agreed with the amount of exports, although sources in Europe had estimated up to 30,000 tonnes might be coming into the market.

Meanwhile, a US Gulf aromatics trader said that 15,000-20,000 tonnes seemed like a large amount and could include some styrene.

News that Dow Chemical's benzene output at Terneuzen in the Netherlands could be shut down prompted a 4-cent jump in July spot benzene prices in the US on Wednesday.
The Dow plant, which has a capacity of 915,000 tonnes/year of benzene and 500,000 tonnes of styrene, will have its aromatics unit down for three weeks, the company confirmed.
A source said export volumes out of the US Gulf could provide "a little bit of breathing room" amid full inventories, since Asian imports came into the region last month.
However, a source said that more benzene imports were scheduled to arrive in the US Gulf for late July and early August. Four vessels were fixed with only one without a buyer, the source said.
Material was heard to be coming not only from Asia but from the Middle East and South America, according to the source.

The benzene overhang had kept spot prices mired in a range in the high-$2.60s/gal for most of the month, which is more than 10 cents under the US July contract. 
More material coming would suggest further downward pressure, but a source said with the exiting exports, supply in the market could come into balance next month.
"By pulling some stuff out to go to Europe, it might make some room for everything else where there might not have been room before," a US source said.

August spot prices in the Gulf remained at a 2-4 cent/gal contango to July values, which were up and straddling $2.70/gal on energy gains and worries about Tropical Storm Bonnie.
Spot levels were talked steady on Friday at $2.68-2.72/gal FOB (free on board) July, as players remained tentative in making moves with inventory, storm and pricing uncertainty abundant. 

Major US benzene producers include BP, ExxonMobil, Flint Hills Resources, LyondellBasell, Shell, Sunoco and Total.

Additional reporting by Truong Mellor
For more on Dow's Terneuzen plant, visit ICIS plants and projects
For more on benzene visit ICIS chemical intelligence
To discuss issues facing the chemical industry go to ICIS connectPaul Hodges studies key influencers shaping the chemical industry in Chemicals and the Economy
quoted from ICIS news.

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