EUROPEAN MARKET

REPORT - AROMATICS
February 22nd, 2008

Issue No. 238

CONTENTS

Page

Current Prices
Price Forecasts-Benzene
Price Forecast- Xylenes
Gasoline/Naphtha
Toluene
Benzene
Cumene/Phenol
Cyclohexane
Styrene
Polystyrene
ESP
Mixed Xylene
Orthoxylene
Paraxylene
PTA/PET

2
3
4
5
6
8
10
12
13
15
16
17
18
19
22

CMAI Europe Ltd

Dubai Dusseldorf Houston London
New York Shanghai Singapore

MARKET SUMMARY
West Europe Benzene Derivatives Overview
Dollars per Ton
2000
Forecast

1600

1200

800

400

0
Jan-07

Jul-07
Benzene Spot

Jan-08
Styrene Spot

Jul-08

Jan-09

Jul-09

Phenol Domestic Contract

How things have changed in the last month. All aromatics prices are on

1st Floor, 14 Waterloo Place

the rise led by the sharp increase in benzene. In one month, benzene prices
Pall Mall, London, SW1Y 4AR have increased by $170 per ton and it is now hanging around $1200 per ton
Telephone: +44 (020) 7930-9818
which is close to its previous record set last May. Energy has been partly
Fax:
+44 (020) 7930-9819

INTERNET ACCESS
www.cmaiglobal.com
email-EMRA@CMAIglobal.com

CONSULTANTS
Alex Lidback - Benzene/Toluene/
Cumene/Phenol
ALidback@cmaiglobal.com
Caroline Duggan- Benzene/
Toluene/Styrene
CDuggan@cmaiglobal.com
Matthew Thoelke - Styrene/
Polystyrene/EPS/ABS
MThoelke@cmaiglobal.com
Barry Davies- Cyclohexane
BDavies@cmaiglobal.com

responsible for theCUMENE

increase in/ aromatics
PHENOLpricing but supply issues have also
aided the rise. The increase in prices is not too surprising for this time of
year. However, the extent of the increase and the speed are. We believe
energy will stay high in the near term and coupled with seasonal consideration from the gasoline side, prices for aromatics should remain high well into
the second quarter before easing. On top of this, the markets should tighten
in the coming months as downstream demand shows its normal seasonal
increase and upstream shutdowns limit feedstock availability. How much
demand improves will depend on how the fragile economies behave.
Toluene, Mixed Xylenes & Paraxylene Overview
Dollars Per Ton
1400
Forecast
1200
1000
800

Simon Moorhouse- Paraxylene/

PTA/PET
SMoorhouse@cmaiglobal.com

600
400

Brian Cooke- Mixed Xylene/

Orthoxylene
BCooke@cmaiglobal.com
Gemma Bellante - Publishing
& Report Distribution
GBellante@cmaiglobal.com

200
0
Jan-07

Jul-07

Jan-08

Toluene Blend Value

PX Spot

Jul-08

Jan-09

Jul-09

MX Spot
Toluene Nitration Grade

This report is for the exclusive use of the client company. Distribution outside of the client company is strictly
prohibited without the prior wirtten consent of Chemical Market Associates, Inc. (CMAI).
The prices presented herein are strictly the opinion of CMAI and are based on
information collected within the public sector and on assessments by CMAI staff.
CMAI MAKES NO GUARANTEE OR WARRANTY AND ASSUMES NO LIABILITY AS TO THEIR USE.
Copyright CMAI 2008 All Rights Reserved

European Market Report - Aromatics

CURRENT PRICE PAGE

Current Prices
Assumptions
W Europe
Crude Oil
$/bbl

W Europe
Naphtha
$/t

6. Brent

6. CIF

07 Oct
Nov
Dec
08 Jan
Feb

82.4
92.4
91.3
92.2
92.6

746
825
838
829
817

07 Q1
Q2
Q3
Q4

58.2
68.7
68.7
88.7

555
670
670
803

Notes

$/

W Europe
Toluene
$/t

6. Regular

6. blend value

746
842
814
816
829

723
832
805
805
824

1.42
1.47
1.46
1.47
1.47

798
856
815
834
811

566
754
754
801

541
712
712
786

1.31
1.35
1.35
1.45

648
895
895
823

$/t

$/t

6. Premium CIF

Base Aromatics
Toluene

Benzene
W Europe
Contract
/t
Notes

07 Oct
Nov
Dec
08 Jan
Feb

Spot
$/t

Exchange Rate

W Europe
Gasoline

US
Contract
Spot
Cts/Gal
Cts/Gal

Mixed Xylenes

W Europe
Spot
$/t

US
Spot
Cts/Gal

W Europe
Spot
$/t

U.S.
Spot
Cts/Gal

Monthly

6. Nitration

6. Nitration

713
722
694
702
737

1031
1035
970
1035
1135

349
348
335
345
354

349
342
324
348
388

775
877
853
886
890

280
294
278
294
307

851
914
884
942
940

273
296
294
307
302

1013
1135
1135
1012

353
395
395
344

350
391
391
338

765
860
860
835

259
298
298
284

853
959
959
883

281
321
321
288

Averaged

776
851
851
710

07 Q1
Q2
Q3
Q4

W Europe
Contract
Delta
/t
/t
Notes

07 Oct
Nov
Dec
08 Jan
Feb
07 Q1
Q2
Q3
Q4

Benzene Derivatives
Styrene

Phenol

Cyclohexane

W Europe
Monthly
Ave. Acquisition
/t
/t

W Europe

to Benzene Distribution

848
857
829
847
882
Averaged
916
989
989
845

135
135
135
145
145

1075
1085
1053
1070
1105

970
979
950
977
1012

140
138
138
135

1130
1213
1213
1071

1030
1108
1108
966

Paraxylene
W Europe
Contract
Spot
/t
$/t
Notes

PTA
US
Spot
Cts/lb

W Europe
Contract
/t

Polystyrene

EPS
W Europe
Contract
/t

Contract
/t

Spot
$/t

W Europe
Contract
/t

Monthly

6. FOB

GP Crystal

1033
1008
982
1021
1058
Averaged
1067
1150
1150
1007

1284
1282
1266
1348
1436

1280
1260
1255
1280
1300

1310
1275
1270
1285
1335

1215
1409
1409
1277

1280
1355
1355
1265

1607
1583
1583
1285

Xylenes Derivatives
DMT
PET

Orthoxylene

W Europe
W Europe
Contract Contract
Spot
/t
/t
$/t

W Europe
Contract
Spot
/t
$/t

PAN
W Europe
Contract
Spot
/t
/t

Monthly

07 Oct
Nov
Dec
08 Jan
Feb

760
760
772
793
785

1005
1058
1035
1061
1060

45.4
49.2
48.2
48.7
47.5

904
902
910
915
902

823
823
831
890
884

1147
1146
1171
1161
1102

975
975
998
988
935

735
720
720
760
750

990
1014
960
0
0

1030
1030
1030
1060
1050

1185
1100
1080
1050
707

07 Q1
Q2
Q3
Q4

827
893
893
764

1059
1178
1178
1033

48.2
53.5
53.5
47.6

912
991
991
905

884
861
861
826

1114
1165
1165
1155

949
975
975
983

1027
1139
1139
988

1027
1167
1167
1030

1223
1358
1358
1122

5. Averaged

General Notes:
1.
2.
3.
4.
5.
6.

All contract prices are on a delivered basis before discounts.

Where necessary historical DM contract prices are exchanged into using 1.95583DM per .
CMAI does not normally publish contract prices when discussions are actively in progress.
Prices relate to West European markets.
Since Q1 2006, the OX quarterly price is the average of the three monthly prices.
Prices have not yet settled as of the time of writing and are therefore subject to change.
The decision to publish or not to publish is solely at the discretion of CMAI staff.

February 22nd, 2008 / Issue No. 238

Page 2

777
880
880
725

European Market Report - Aromatics

PRICE FORECAST

West Europe Price Forecast - Benzene and Derivatives

Assumptions
Crude Oil
$/bbl
$/bbl

Gasoline

Naphtha
$/t

$/t

$/t

Toluene Blend Value

$/t

Notes

Brent

Dubai

CIF

Premium

Regular

Based on 91 and 95 RON gasoline

08 Q1
Q2
Q3
Q4
09 Q1
Q2
2005
2006
2007
2008
2009
2010
2011
2012

92.5
91.2
84.9
82.2
79.1
78.2
54.7
65.7
72.6
87.7
77.5
67.7
63.2
62.3

87.8
86.2
80.6
77.8
74.0
74.2
49.3
61.5
68.4
83.1
73.4
64.2
59.6
58.6

825
826
776
755
721
707
476
565
676
796
703
608
563
555

836
901
805
742
718
779
536
632
710
821
728
639
596
586

822
853
776
722
693
738
498
588
678
793
700
618
576
567

859
1053
885
788
795
944
666
784
809
896
823
698
649
636

HDA

Benzene
Contract
/t
Notes

08 Feb
Mar
Apr
May
Jun
Jul
2005
2006
2007
2008
2009
2010
2011
2012

Spot
$/t

Margin
/t

1135
1178
1163
1136
1076
1028
848
955
1047
1070
971
836
777
760

Margin
$/t

958
1025
905
926
882
928
698
882
896
954
873
792
755
769

41
-85
-31
90
37
-68
-5
55
44
4
0
46
60
88

Notes

08 Q1
Q2
Q3
Q4
09 Q1
Q2
2005
2006
2007
2008
2009
2010
2011
2012

1.
2.
3.
4.

Cyclohexane

Phenol

Spot
$/t

Contract
/t

Hydrogen
/t

Spot
/t

Nitration

Monthly

3. On-purpose

Distribution

123
53
-19
-105
-132
-63
22
0
53
6
-9
3
2
2

-17
19
46
80
92
48
116
130
79
31
69
27
21
18

890
936
957
954
942
819
636
775
812
879
822
776
725
712

882
946
939
921
880
837
781
885
911
872
847
777
742
759

1562
1631
1666
1648
1593
1524
1100
1239
1312
1548
1423
1419
1421
1472

1105
1170
1150
1130
1080
1040
973
1018
1134
1078
988
1011
987
1023

Mixed Xylenes
Spot
$/t

1.470
1.470
1.461
1.433
1.405
1.376
1.248
1.256
1.370
1.459
1.362
1.300
1.250
1.200

Margin
/t

Monthly

737
801
791
773
732
699
671
741
774
730
713
643
622
633

Pygas Toluene

Exchange Rates
$/

Styrene
Contract
/t

Polystyrene

Margin
/t

Monthly

5,6

1063
1122
1044
1016
1021
1047
950
1051
1078
1061
1021
934
931
982

-43
-6
-6
-6
3
3
46
39
-5
-15
3
2
21
43

Monthly
/t

Margin
/t

1303
1333
1257
1230
1223
1247
1143
1188
1307
1281
1227
1130
1130
1180

140
117
114
113
103
101
69
6
130
121
103
77
72
73

Page 3

Margin
/t

1012
1077
1063
1044
1000
965
933
980
1030
998
952
980
950
960

202
208
197
199
190
188
255
178
238
189
125
204
214
233

EPS
Contract
/t

Margin
/t

1333
1427
1393
1360
1340
1380
1223
1435
1475
1378
1363
1240
1310
1350

83
125
163
153
127
143
42
161
206
131
145
85
146
134

HDA economics are based on benzene at spot.

Pygas extraction economics are based on benzene only at contract value. Pygas valued using formula.
Cash cost of hydrogen production based on steam reforming of natural gas.
Phenol margin is based on distribution market business.

February 22nd, 2008 / Issue No. 238

Ave. Acq.
/t

European Market Report - Aromatics

PRICE FORECAST

West Europe Price Forecast - Xylenes and Derivatives

Assumptions
Crude Oil
$/bbl
$/bbl

Naphtha
$/t

$/t

$/t

Toluene Blend Value

$/t

Gasoline

Notes

Brent

Dubai

CIF

Premium

Regular

Based on 91 and 95 RON gasoline

08 Q1
Q2
Q3
Q4
09 Q1
Q2
2005
2006
2007
2008
2009
2010
2011
2012

92.5
91.2
84.9
82.2
79.1
78.2
54.7
65.7
72.6
87.7
77.5
67.7
63.2
62.3

87.8
86.2
80.6
77.8
74.0
74.2
49.3
61.5
68.4
83.1
73.4
64.2
59.6
58.6

825
826
776
755
721
707
476
565
676
796
703
608
563
555

836
901
805
742
718
779
536
632
710
821
728
639
596
586

822
853
776
722
693
738
498
588
678
793
700
618
576
567

859
1053
885
788
795
944
666
784
809
896
823
698
649
636

Paraxylene

PTA

PET

Mixed Xylenes
Spot
$/t

Exchange Rates
$/
1.470
1.470
1.461
1.433
1.405
1.376
1.248
1.256
1.370
1.459
1.362
1.300
1.250
1.200

Orthoxylene

Margin Contract Margin Contract Margin Contract Margin

$/t
/t
/t
/t
/t
/t
/t

Notes

Contract
/t

MEG

Margin
/t

Contract
/t

Margin
/t

-58
-141
-59
14
-45
-147
-41
-17
18
-61
-92
-29
-23
30

1048
926
842
758
712
700
843
818
898
894
692
650
610
690

487
372
297
194
155
156
416
342
389
338
127
116
82
146

9. Averaged

08 Q1
Q2
Q3
Q4
09 Q1
Q2
2005
2006
2007
2008
2009
2010
2011
2012

958
1025
905
926
882
928
698
882
896
954
873
792
755
769

41
-85
-31
90
37
-68
-5
55
44
4
0
46
60
88

798
859
828
846
793
811
745
895
830
833
787
731
734
752

-122
-194
-86
-28
-84
-191
-64
-40
-55
-108
-134
-74
-64
-70

915
972
961
952
905
923
845
959
944
950
904
814
849
919

52
63
66
57
67
68
96
40
70
59
67
27
49
87

1122
1173
1147
1129
1095
1112
1132
1154
1137
1143
1114
1050
1075
1175

-58
-11
2
14
24
30
-7
-31
-17
-13
47
50
52
69

760
805
759
783
729
746
670
801
811
777
721
718
707
781

7. MEG margin is for fibre grade on an integrated basis

8. Margins are on a cash cost before tax basis
9. Since Q1 2006, the OX quarterly price is the average of the three monthly prices.
These price forecasts are stricly the opinion of the staff of CMAI, and are based on information in the public sector.
CMAI makes no warantee or guarantee as to their use. CMAI does not normally publish price forecasts when discussions
are in progress. The decision to publish or not to publish is solely at the discretion of CMAI personnel.

February 22nd, 2008 / Issue No. 238

Page 4

European Market Report - Aromatics

GASOLINE / NAPHTHA

West European Crude Oil and Gasoline Prices

$ Per Barrel
100

West European Crude Oil and Naphtha Prices

$ Per Ton
1000

$ Per Ton
900

Forecast

Forecast

90

800

80

800

700

70
600

60

600
500

50
40

400

30

400
300

20

200

200

10
100

0
Jan-07

0
Jul-07

Jan-08

Crude Oil Brent

Jul-08

Jan-09

Gasoline Premium

Jul-09

0
Jan-07

Gasoline Regular

Source: Purvin & Gertz

West European Naphtha Less Brent Crude Oil

$ Per Ton
250

$ Per Ton
350

Forecast

Jul-07

Source: Purvin & Gertz

Jan-08

Jul-08

Crude Oil Brent

Jan-09

Jul-09

Naphtha cif

West European Premium Gasoline Less Brent

Crude Oil
Forecast

300

200

250
150

200
150

100

100
50

50
0
Jan-07

Jul-07

Jan-08

Jul-08

Jan-09

Jul-09

Source: Purvin & Gertz

$ Per Ton

West European Premium Gasoline Less

Naphtha

0
Jan-07

$ Per Ton
70

120
Forecast
100

Jul-07

Jan-08

Jul-08

Jan-09

Jul-09

Source: Purvin & Gertz

West European Premium Less Regular

Gasoline
Forecast

60

80
50

60
40

40
30

20
20

10

-20
-40
Jan-07

Jul-07

Jan-08

Jul-08

Source: Purvin & Gertz

February 22nd, 2008 / Issue No. 238

Jan-09

0
Jan-07

Jul-09

Jul-07

Source: Purvin & Gertz

Page 5

Jan-08

Jul-08

Jan-09

Jul-09

European Market Report - Aromatics

TOLUENE

TOLUENE
Toluene Prices

The spot market has seen a few ups and downs

over the course of the month due to the recent
Forecast
volatile movements in energy, but overall toluene
1000
80
values have strengthened. Having climbed back
up to over $900 per ton, following a decline last
800
60
month to the low $800s, toluene spot continues
to increase presently reaching the mid $900s.
40
600
Crude once again achieved record highs as Brent
crossed over $97 per barrel and as a result Euro400
20
pean gasoline values topped a new record high
200
0
as premium unleaded gasoline reached the high
$800s per ton.
0
-20
Market activity has been fairly sluggish as prices
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
continue to move in tandem with energy. Febru~
NAM - WEP Price Delta
NAM
WEP
ary business was concluded within a range of
$865-$880 whilst March traded within the $890-$925 per ton range. Various contract price settlements were agreed
within the $890-$910 per ton range, reflecting current market levels at the time.
NAM - WEP
Dollars Per Ton
100

Dollars Per Ton

1200

We believe toluene prices will continue to rise

well into the second quarter before sliding south
1.6
in the summer months due to gasoline consideraForecast
1.5
tions. Longer term, CMAIs forecast is for toluene to remain expensive due to energy, not supply/
1.4
demand or octane demand. The graph shows the
1.3
delta to the U.S. and we believe this will disappear in the middle of 2009 when ExxonMobil
1.2
expands its paraxylene capacity using toluene as
1.1
its feestock. At that point Europe will move from
a slight net export position to balanced.
1.0
Gasoline values have jumped up significantly
0.9
throughout the month, an increase of almost $100
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
since the end of January and the ratio to toluene
Source: CMAI, Purvin & Gertz
~
has contracted downwards after having touched
1.1 at the start of the month. The ratio is expected to decrease over the next 6 months as gasoline levels increase at a
much faster pace compared to toluene. The bottom should be in reached in July before rebounding once again. In
2009, we expect a fairly flat ratio as the toluene prices relative to the U.S. is projected to transition to parity.
West European Toluene to Premium Gasoline
Ratio

Dollars per Ton

1200

West Europe Toluene Netback Values

Benzene at contract price

1100
1000
900
800
700
600
500
400
Jan-06

Jul-06
Toluene spot

Jan-07
Octane

HDA

February 22nd, 2008 / Issue No. 238

Jul-07
TDP

Jan-08
STDP

Page 6

The attached graph shows the netback value of

toluene into a variety of end uses. In the last few
weeks toluene spot prices have increased again
trailing both crude and gasoline, after having
declined last month.
Netback values into TDP, STDP and HDA have
all increased this month in line with toluene
prices. HDA margins have seen a significant
improvement since the beginning of the year also
taking into account the widening spread between
benzene and toluene values, which currently
stands at around $300 per ton. Despite positive
margins, it is our understanding that HDA units
are not running taking into account impending
turnarounds.

European Market Report - Aromatics

West Europe Reformer & BTX Index

INDEX
190
180
170
160
150
140
130
120
110
100
90
80
Jan-06

Jul-06

Jan-07

Octane blending value

BTX extract octane

$ Per Ton
1200

Jul-07

Jan-08

BTX extract naphtha

Cash cost

800
600
400
200
0
-200
Incremental calculated between 95 and 98 RON unleaded gasoline

Jul-05

Jan-06

Spot less Inc. BV

Blend Value

Jul-06
Spot less BV
Inc. Blend Value

Jan-07
Spot

Jul-07

For some time now the profitability of the reformer for octane has been at either breakeven or
negative, for the last few months it has remained
negative as the graph shows.
BTX at blend values have increased significantly
this month. BTX values relative to both octane
and naphtha have declined. (Naphtha price levels
have been reaching record highs of late).
We do expect that seasonality will come into
place. As evident by the graph there is an upward
trend relative to blend values. What is also evident in the graph is the downward trend of BTX
extraction over the last year. If the reformers are
having such a difficult time it will be interesting
to see how companies react but we should expect
a rebound in the coming months.
The toluene market in Europe is fairly wellbalanced, despite some supply limitations. For the
next few months toluene demand will be strong
as gasoline blenders start to build stocks for the
U.S. driving season and therefore the market will
remain balanced. As a result we expect toluene
prices to continue rising in the coming months
hovering around record levels on the back of
crude entertaining itself around $100 per barrel.
We anticipate that toluene will flow to the U.S.
in Q1 and prices will remain lower than those
in the U.S.

West European Toluene Values - Spot and

Blend Value

1000

-400
Jan-05

TOLUENE

Jan-08

Of late, activity has been primarily from trade with little interest from both producers and consumers as arbitrage opportunities have resurfaced. Not that long ago we saw a flow of product leave Europe for Asia as well
as India and the Middle East, but now we are on the verge of seeing the arbitrage open up from Europe to the
USG. With the recent market movements tracking crude it almost looked as though this arbitrage opportunity
would be short-lived; however, U.S. values have only just recently surged sharply upwards.
The market at the moment appears to be fairly well balanced although on the supply side product availability has
been fairly limited partly due to reduced production and this is likely to remain so in the run up to forthcoming
turnarounds.

February 22nd, 2008 / Issue No. 238

Page 7

European Market Report - Aromatics

BENZENE

BENZENE
February benzene contract prices settled at 737 per ton based on a U.S. dollar price of $1092 per ton, an increase
of 35/$59 per ton from the January benzene contract price of 702/$1033 per ton.
Over the last few months we maintained that benzene prices relative to energy and naphtha were fairly low.
Therefore, we were expecting for prices to increase but what has transpired over the past month has been faster
and higher than expected. Recently, spot benzene prices have been hovering around $1,200 per ton. To sum
things up, in one month spot benzene prices have increased by $170 per ton and the benzene to naphtha spread
rose by $100 per ton to $335 per ton.
The increase in naphtha spreads indicate that this increase has to do with energy. There are a number of reasons.
There was talk of pygas tightness due to some cracker operating issues as well as a shift to butane. However, we
believe this was not a major issue. We do believe some other production issues have been taking place. In the
end, there were many bullish factors and no one was bucking the trend as the old clich the trend is your friend
appears to have reared its headonce again. Hence, we are now near a record price which was set at $1225 per
ton in May 2007. Entering March contract price negotiations, we should expect a hefty increase.

There was improvement in demand with the

return of Ineos Phenols number one unit in
January. More recently the second unit is in
14%
startup mode. Furthermore, BASFs styrene
100
12%
unit at Antwerp remains off line. Benzene
80
supply is being added in the form of styrene
10%
as fairly large volumes of styrene are entering
60
8%
the region from the U.S. Seasonally, demand
6%
should continue to improve but there are many
40
signs of a soft economy that would have a nega4%
tive impact on downstream demand.
20
2%
It is our understanding that only limited capacity
0
0%
was offline but it was enough to trigger the price
Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08
run. Some were caught short and were forced
~
Lost Capacity
% Lost Capacity
to enter the market. $170 per ton later and the
market is at near record levels. Production issues must be more serious than confirmed.
We expect to see some significant amount of downtime in Q2 with capacity loss of around 10-15% and as is
normally the case, we should expect more downtime than is currently confirmed. It is worth noting that large
levels of styrene capacity will be off line in the coming months.
West Europe Benzene Capacity Outages

Thousand Tons
120

% Lost Capacity
16%
Forecast

This graph shows what major derivatives are

capable of paying and yet breakeven and it
1200
Forecast
highlights our benzene price forecast (bars).
1000
CMAI expects derivatives to move up and
down with benzene and absolute prices are at
800
the mercy of benzene, suggesting derivatives
will struggle to see any margin appreciation.
600
Projected benzene prices in the near term are
expected to remain very high. The combination
400
of near record energy prices and the current
200
run for varying reasons will not dissipate anytime soon. At this point, there is a reluctance
0
to short the market, even at such high prices,
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
suggesting there is little interest to see a major
Benzene
Contract SM
Spot SM
Phenol
~
correction.
The longer term forecast also indicates that benzene prices will remain expensive through the end of 2009. This
is partly due to energy prices remaining high, not due to lack of benzene. We believe that globally benzene
supply is only going to grow.
West Europe Benzene Netback Values

Euro per Ton

February 22nd, 2008 / Issue No. 238

Page 8

European Market Report - Aromatics

BENZENE

The benzene to naphtha spread has increased considerably over the past month. Only two months
1400
Forecast
ago the spread was at around $100 per ton or
1200
lower, falling to levels not seen since early 2002.
We knew this was not sustainable and an increase
1000
was imminent. A month ago, the spread was $230
800
and is now at around $335 per ton.
CMAIs forecast in the near term is that there is
600
too much momentum in the market and the spread
400
will remain above $300 per ton until June. The
increase can also be attributed to a seasonal up200
swing from gasoline values. Benzene availability
0
will continue to improve as more benzene enters
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
the market. Demand growth is expected to be
~
Delta
Benzene Spot
Naphtha
capped by recent economic woes.
We do not believe spreads starting in June will recover to over $300 per ton throughout the forecast period, which
has now graphically been extended through 2009. The reason: more and more benzene availability.
West Europe Benzene and Naphtha Delta

Dollars per Ton

During February octane values took a hit while

benzene prices began to run. Consequently, HDA
units have been able to generate some very healthy
Forecast
returns, which are in fact the highest in about one
300
year. We believe that through April HDA units
200
will show a positive return but by April margins
100
should be only barely positive. In the midst of the
driving season we believe HDA margins will once
0
again go negative forcing companies to analyze
-100
their operations.

The
difficulty for these units is that the gasoline
-200
season will give a boost to toluene prices and blend
-300
values which will keep pressure on these facilities.
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
Therefore, we do not believe HDA margins will
Blend Value
Spot
T / X Stream
~
move into the black until the middle of the year.
For 2008 and 2009, we do not expect HDA variable margins to be all that attractive considering the growing length
in the global benzene market although, yet not felt. HDA should continue to be a key price marginal indicator for
the foreseeable future as it will tend to be a key market balancing benzene route. These types of dynamics are not
surprising considering these types of facilities have alternatives for their feedstocks into a large gasoline pool.
West Europe HDA Variable Margins
Toluene at Spot, Blend Value and T/X Stream

Dollars per Ton

400

Reformer margins have been struggling since

October. This should not be too surprising conEuro per Ton
sidering the time of year but both gasoline and
150
Forecast
aromatics had been struggling until recently. We
125
believe that reformer margins will be positive
100
starting in March and remain as such through
75
the summer driving season.
50
Beyond the summer, we believe that seasonality
will have a negative impact on reformer mar25
gins, once again all negative. Contribution from
0
aromatics over the life of this graph is expected
-25
to be tested as more and more aromatics enter
-50
the market. In addition, octane availability is
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
quickly improving suggesting blend values will
Octane Values
Extraction Values
~
have a ceiling.
It is important to remember that the gasoline industry is going through major changes as more and more ethanol
enters the market. Influences into the aromatics market will be interesting to watch.
West Reformer Cash Cost Margins

Benzene at Contract and Toluene & Mixed Xylenes at Spot

February 22nd, 2008 / Issue No. 238

Page 9

European Market Report - Aromatics

CUMENE / PHENOL

CUMENE / PHENOL
The supply side continues to show signs of improvement. Ineos Phenol at Antwerp as in restart mode
on its second unit. The supply side continues to
100
dominate. All local producers are selling everything
they make. Last year, imports, primarily from the
80
U.S., helped balance the system, which allowed the
market to barely keep its snorkel above the water
60
line. With a soft U.S. economy, partly due to a weak
40
construction market, there has been ample product
to ship to Europe. In the end, inventories remain
20
low and balances are tight

For 2008, once all the capacity returns a portion

0
06
Q2
Q3
Q4
07
Q2
Q3
Q4
08
Q2
Q3
Q4
of the phenol imports will shift to cumene as the
~
Production
Demand
Effective Op Rate
Effective Capacity
additional phenol capacity from Ineos Phenol does
not have corresponding cumene.
The expectation for 2008 is for phenol availability to improve by the end of Q1. All issues will not be solved by then
but it should be better. Another key will be demand.
West Europe Phenol Supply/Demand

Thousand Tons
800
700
600
500
400
300
200
100
0

% Operating Rate
120
Forecast

Domestic demand has been more than good

enough to sustain the tight market. Most sectors report that demand continues handsomely
along although more recently formaldehyde
resins have seen a slowdown. The record high
methanol levels are having a negative impact
on production as margins are taking a hit. Seasonally, demand has yet to really pick up into
this sector. The combination of the two has not
seen phenol demand into this sector reach its
potential.
Entering 2008, most would agree the economy
04 Q2 Q3 Q4 05 Q2 Q3 Q4 06 Q2 Q3 Q4 07 Q2 Q3 Q4 08 Q2 Q3 Q4
will slow and that should limit demand growth.
Bisphenol A
Nylon/Cyclohexanol
Phenolic Resins
~
Having said that, we expect on the whole deOthers
Net Exports
Production
mand in 2008 should be similar to 2007.
With the additional capacity in place and no duty on European product destined for China, we expect net phenol
exports to Asia to increase in 2008. Therefore, a fairly large portion of the new capacity will not be seen in the
domestic market.
West Europe Phenol Demand by End-Use

Thousand Tons
700
600
500
400
300
200
100
0
-100

West Europe Phenol Capacity Outages

Thousand Tons
60

% Lost Capacity
25%
Forecast

50

20%

40
15%
30
10%
20
5%

10

0%

Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08

Lost Capacity

% Lost Capacity

February 22nd, 2008 / Issue No. 238

Page 10

In operational news, Ineos Phenols number two

unit at Antwerp is in start up mode. This has been
one of the key points as to why the market has
been so tight. At this point, Ineos Phenol has not
changed its force majeure sales allocation of 70
per cent of previous volumes. As a reminder, the
unit will have an expansion of 210,000 tons.
It is early to have all the scheduled outages for
2008 but Ineos Phenol who had a scheduled twoweek shutdown in April at Gladbeck has been
pushed back to September. In addition, Ertisa
has an outage scheduled in March on its number
one unit in March, and in August NOVACAP in
France has scheduled a short outage. Thus far,
those are the only confirmed scheduled outages
but we should expect further outages.

European Market Report - Aromatics

Phenol Raw Material Costs
Euro per Ton
1000

Forecast

900
800
700
600
500
400
300
200
100
0
Jan-07

Jul-07
BZ Contribution

Jan-08

Jul-08

C3 Contribution

Jan-09

Jul-09

Net Raw Material Costs

CUMENE / PHENOL
The graph shows the effects of benzene and
propylene on cumene/phenol production
costs. The line in the graph shows phenol raw
material costs (not including variables and
fixed costs) including an acetone credit. The
acetone value is based on discounted prices.
The graph illustrates that raw materials are
going strong. Propylene saw a sharp increase
in the first quarter and benzene as of late is
once again on one of its impressive runs with
spot prices hovering around $1200 per ton.
Therefore, costs will only increase in the near
term before the expected relief in the second
half of the year.

As you may recall from last months report, we believed that benzene prices had to rise as prices were too low
relative to energy/naphtha. However, not this soon and this high. Please note that CMAIs production economics analysis does not include corporate overhead or depreciation suggesting margins are lower than shown.
One difficult issue is that producers continue to lag on the acetone versus propylene front. In the first quarter,
propylene prices rose by 57 per ton while acetone only achieved a 15 per ton increase.

West Europe Integrated Cumene-Phenol

Producer
Net Margin, %

The February contract phenol price rose

with benzene prices by 35 per ton in Febru35%
Forecast
ary, contract phenol prices rose by an equal
30%
1200
level to 1161 per ton. As you may recall
from previous reports, CMAI has an aver1000
25%
age acquisition price for phenol which is
20%
800
made up of a combination of benzene plus
15%
600
formula contract prices and monthly freely
negotiated prices. This price in February
10%
400
also rose by 35 per ton to 1012 per ton.
5%
200
While phenol prices on average in 2008 will
0%
0
be higher relative to benzene in 2007, the
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
first quarter points to no gain in margins as
Cash Cost
Avg. Acquisition Phenol Prices
Net Margin %
acetone prices in the first quarter only rose
~
a fraction of the propylene price increase.
What is interesting or better yet a painful pill for producers to swallow is that the market has
been extremely tight and yet margins continue to suffer. The phenol price increase relative
to benzene is good news but most did not expect that any benefit would be lost so quickly.
For the balance of the year, we expect that acetone will continue to struggle relative to propylene as more acetone
capacity comes on line. Even with the outages over the past five months, acetone has been amply supplied and
hence, laboured relative to propylene. Therefore, we do not expect that returns will see an improvement in 2008.
More time will be needed to change market dynamics for phenol/acetone margins to improve for producers.

Euro per Ton

1400

February 22nd, 2008 / Issue No. 238

Page 11

European Market Report - Aromatics

CYCLOHEXANE

CYCLOHEXANE
The West European cyclohexane market showed
some tightness in the middle of the month as
a result of some reported production difficulties at one supplier and some stock building in
anticipation of future production constraints for
two producers in March and later in Q2.
One supplier also suffered delivery problems as
a result of a defective bridge in Hamburg.
However, there were no reports of any shortages
in the market and at the end of the month spot
lots were being offered by traders and imports
were arriving from the U.S. and Argentina.

West Europe Cyclohexane / Caprolactam Prices

Euro per Ton
2000

Forecast
1800
1600
1400
1200
1000
800
600
400
200
0
Jan-07

Jul-07

Jan-08

Jul-08

WEP CHX Contract

WEP Capro Spot Export

Jan-09

Jul-09

Ammonia
Margin over CHX + Amm

West Europe Benzene and Cylcohexane Prices

European caprolactam production was hit in

mid-February by production issues at three producers. Only one of these, however, used cyclohexane directly as feedstock and there appeared
to be no significant impact on demand.
Later in the month, caprolactam became more
freely available than recently, suggesting a
slight easing in the tightness of that market.
Cyclohexanone also became more freely
available, an indication of possibly weaker
downstream demand for both adipic and caprolactam.
Adipic demand was less robust, globally.

Euro per Ton

1200
Forecast
1000

800

600

400

200

0
Jan-07

Jul-07

Jan-08

Delta

Jul-08

Benzene

Jan-09

Jul-09

Cyclohexane

West Europe Cyclohexane Delta, Hydrogen

Values, Costs
Euro per Ton
160

Forecast

140
120
100

80
60
40
20
0
Jan-07

Jul-07
H2 Fuel Value

Jan-08

Jul-08

Jan-09

H2 Production Cash Cost + 10% ROI

February 22nd, 2008 / Issue No. 238

Jul-09
CHX Delta

Page 12

A settlement of 145 per ton was eventually

assumed for the Q1 delta, this being the price
openly confirmed between a number of producers and buyers. Two consumers had apparently
been able to negotiate a lower figure of 140
with an unidentified supplier, but this remained
unconfirmed from the production side.
With contract benzene rising sharply by 35
per ton in February to 737, the delta-based
contract price for CHX came in at 882 per
ton.
Benzene prices are continuing to rise through
late February, but CMAI still expects both benzene and the CHX delta to peak in Q2, drifting
down slowly for the rest of 2008.

European Market Report - Aromatics

STYRENE

STYRENE
West European Styrene Supply/Demand
Thousand Tons

% Oper. Rate
95%

1800
1600
1400

90%

1200
1000
85%

800
600
80%

400
200
0

75%

07

Q2

Production

Q3

Q4

08

Demand

Q2

Q3

Capacity

Q4

09

Nameplate

Q2

Q3

Effective

Q4

West Europe Styrene Capacity Outages

Thousand Tons
80

% Lost Capacity
16%
Forecast

70

14%

60

12%

50

10%

40

8%

30

6%

20

4%

10

2%

0%

Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08

Lost Capacity

% Lost Capacity

Supply-demand in Europe remains in balance with much of the POSM operations

running at reduced rates reflecting weaker
demand into propylene oxide. The BASF
outage continues to limit supply in Antwerp.
Demand has not seen any improvement
in February. Despite the improvement in
EPS demand and therefore production,
PS demand has not seen the usual seasonal upswing and remains disappointing.
The outlook for the remainder of the year
is for continued issues with supply based
on weaker PO demand. Also, the on-going macroeconomic concerns are unlikely
to support significant derivative growth.
March and April will see the biggest impact
on styrene availability based on planned
outages for 2008. There may be other turnarounds later in the year, as well as the risk of
unplanned outages, which are not yet known
or finalised.
The overall picture for the year is no different
from usual, although the impact of outages is
never as significant in a fundamentally oversupplied market.
The current level of imports will allow the
market to handle the planned outages with
relatively little impact.

There has been significant variation in price

levels between regions in the past months with
Current Spot Prices and Trade Opportunities
European prices in particular moving out of
line with the other regions. The fact that there
currently exists a significant incentive to move
volume from the U.S. and Asia into Europe
is not necessarily stimulating the volumes
$1433 per ton
$1471 per ton
required as there continues to be concerns
$1384 per ton
over the sustainability of the European spot
1600
markets.
1500
1400
The volume of styrene currently shipped or
1300
that is planned to ship to Europe from the U.S.
1200
does not appear to have been sold, which may
Jan 30 Feb 06 Feb 13 Feb 20
Europe
Asia
U.S.
result in weaker sentiment in the styrene spot
markets.
Spot prices in Europe have moved up significantly on the back on higher benzene prices and high energy costs.
The forward markets continue to see elevated pricing in anticipation of the turnaround season. Nevertheless,
activity has been limited except for the first week of February.

Global Styrene Spot Markets

US dollars per ton

February 22nd, 2008 / Issue No. 238

Page 13

European Market Report - Aromatics

STYRENE

WEP Styrene Economics

Euro per Ton
1200
Forecast
1000
800
600
400
200

0
-200
Jan-07

Jul-07

Jan-08

R.M. Cost
Margin

Jul-08

Jan-09

Variable Cost
Average Acquisition

Jul-09

Fixed Cost
European Spot Price

WEP Styrene Chain Margins

(In Terms of Styrene, net of typical discounts)
Euro per Ton
300
Forecast

250
200
150
100

50
0
-50
-100
06

Q2

Q3

Q4

07

Ethylene

Q2

Q3

Benzene

Q4

08

Styrene

Q2

Q3

Q4

09

Q2

Q3

Q4

Total Margin

Does not include corporate overhead, depreciation, return on capital

West European Styrene Chain Analysis - ROI

ROI
30%

Forecast
25%
20%
15%

10%
5%
0%
-5%
-10%
-15%
Jan-07

Jul-07

Jan-08

Styrene Conventional

Jul-08
PSE

Jan-09
EPS

ROI does not include allowance for depreciation or coporate overheads.

February 22nd, 2008 / Issue No. 238

Jul-09
ABS

Page 14

The CMAI average acquisition price for European styrene in February has increased from
Januarys level of 925 per ton to 972 per
ton. There has been a slight improvement on
industry profitability; however, conventional
styrene units have been losing money for the
last several months. The increase in spot
prices has supported a higher value against
feedstock.
Contractual prices for January settled in the
first couple of weeks of the month at 1038,
1070 and 1075 per ton on an FD basis. The
FCA price concluded at 1070 per ton, equivalent to 1077 per ton FD, giving a monthly
CMAI range of 1057.5-1082.5 per ton FD
(barge-railcar delivery), which constitutes an
increase of 36.5 per ton.
The uplift in benzene values versus naphtha
for February, which were even more noticeable in the spot markets, has resulted in an improved integrated margin picture for styrene
production. However, higher naphtha prices
are impacting steam cracker economics and
resulting in a reduced margin for ethylene
production compared to January.
Styrene margins are forecast to improve in
Q2 and for the remainder of 2008 versus Q1
levels; however, the loss of margin in benzene
production and steam cracker operations will
continue to leave integrated economics unattractive, although not negative

Upward price movement in the derivatives

has not been sufficient enough to cover the
increase in feedstock costs; therefore, there is
a decline in margin profitability for integrated
producers, particularly if the monthly contract
price levels are used as a benchmark.
EPS profitability is anticipated to improve
later in 2008 whilst PS profitability will decline. ABS has shifted to a positive position
versus early 2007, although all derivatives are
being negatively impacted by high styrene
costs in Europe versus the other regions.

European Market Report - Aromatics

POLYSTYRENE

POLYSTYRENE
West Europe Polystyrene Supply/Demand
Thousand Tons
700

% Oper. Rate
100%

600
90%
500
80%

400
300

70%

200
60%
100
0

50%
07

Q2

Q3

Q4

Production

Euro per Ton

1600

08

Q2

Demand

Q3
Capacity

Q4

09

Q2

Q3

% Operating Rate

Q4

Polystyrene, Polypropylene, PET

West Europe Domestic Prices
Forecast

1400

1200

1000

800

600

400
Jan-07

Jul-07

Jan-08
PS

Jul-08
PP

Jan-09
PET

Jul-09

Polystyrene demand weakened in February

versus January, although neither month has been
particularly robust with respect to demand. The
impact of growing uncertainty over the economic
situation in the U.S. and the risk of negative sentiment spreading further afield is taking its toll on
the European and global polymer markets.
The fact that the polyethylene, polypropylene
and PVC markets are also seeing some weakness
is little consolation to PS producers in Europe,
although there is some comfort in the fact that a
return to the 2004-2006 situation is likely with
operating rates at healthy levels.
The demand outlook suggests that Europe will
see further growth following the strong year in
2007, although broader economic woes would
take its toll.
Polymer substation has been a major concern for
polystyrene producers over the past few years,
with possibilities of substation into polypropylene, PET and ABS depending on the application.
The loss of demand in 2004-2006 can be, in part,
associated with an uncompetitive PS price. In
2007 price differentials favoured polystyrene
and growth returned.
Polystyrene prices have looked competitive over
the past few months, although increasing benzene costs are driving price levels up relative to
the competition. The forecast suggests that the
summer months may result in a great struggle;
however, the bigger issue will be the decline in
polypropylene prices into 2009.

The January price range for PS in Europe has

been revised downwards by 10 per ton to take
1600
Forecast
into account the end-month activity, resulting
1400
in a range of 1240-1320 per ton.
1200
The price levels moved up in February to reflect
1000
higher feedstock costs. However, in a relatively
weak market producers have struggled to pass
800
on the full increase, so price levels are expected
600
to increase by 20-30 per ton, although end400
month agreements may be above this level if
200
convertors look to pre-buy ahead of the increases in March. This results in a price range
0
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
of 1260-1340 per for February.
Raw Materials
Variable Costs
~

The result for margins is negative. Styrene

Fixed Costs
Contract Price
prices have risen ahead of polystyrene and
producers were required to reduce margins.
Nevertheless, the margin position built up during the second half of 2007 allowing them to do this whilst still
maintaining a profitable position.
WEP Polystyrene Economics

Euro per Ton

February 22nd, 2008 / Issue No. 238

Page 15

European Market Report - Aromatics

EPS

EPS
The uncertainty in the EPS markets during January, with some producers seeing an improved
demand picture whilst others were seeing ongoing struggles in their markets, has resolved
90%
itself with widespread improved demand for
European product.
80%
The traditional seasonality in demand, particularly in central and eastern European markets,
70%
continues to keep some customers away, although for most western European producers
60%
demand is picking up ahead of the spring building season.
50%
Strong demand in February can be part explained
07
Q2
Q3
Q4
08
Q2
Q3
Q4
09
Q2
Q3
Q4
by another mild winter; however, some inven~
Production
Demand
Capacity
% Operating Rate
tory build is likely.
Stocks downstream from producers will have been run down in the second half of 2007as prices declined they
will need to be partially replenished ahead of the spring and summer.
West Europe EPS Supply/Demand

Thousand Tons
400
350
300
250
200
150
100
50
0

% Oper. Rate
100%

EPS WEST EUROPE IMPORTS

EPS EXPORT DATA TO WEST EUROPE
EXPORTS FROM:

Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07 Jul-07 Aug-07 Sep-07 Oct-07 Nov-07 Dec-07

South Korea

3.0

1.6

1.4

1.7

1.5

1.2

0.6

0.1

0.0

0.0

0.1

Taiwan

5.0

2.7

3.0

1.1

2.7

2.5

1.5

1.1

0.8

0.2

0.6

*
*

China

6.8

5.5

6.5

5.6

6.4

4.5

4.0

1.5

0.5

0.4

0.3

0.3

Rest of World

0.4

0.7

0.6

0.3

0.7

0.4

1.1

-0.7

2.3

0.8

0.4

0.3

EPS IMPORT DATA INTO WEST EUROPE

IMPORTS FROM:

Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07 Jul-07 Aug-07 Sep-07 Oct-07 Nov-07 Dec-07

South Korea

2.6

2.1

1.8

1.7

1.3

1.2

1.3

0.7

0.2

0.2

Taiwan

3.9

5.6

2.1

5.3

1.5

3.0

1.9

1.9

0.7

0.6

*
*

China

5.5

4.1

6.1

6.3

4.3

5.8

3.6

2.2

0.9

0.2

Rest of World

3.7

0.9

1.8

1.5

1.6

1.9

1.1

2.0

2.2

3.0

Total Imports

15.8

12.7

11.7

14.7

8.7

11.8

7.9

6.8

4.0

4.0

3.5

2.4

* Trade Data Not Available

Estimated Imports Based on Export Data

Typically Transit Time From Asia to the West Europe is 6-8 weeks.

The sharp decline in EPS imports into Western

Europe, as indicated in the table, has been a
consequence of the much weakened market in
Europe. The declines in Western Europe have
been matched by similar declines in Central
Europe. The inventory build that took place in
2006 and 2007 affected the whole market.
The likelihood of a return to the same level of
imports seen in 2007 during 2008 is very low.
European producers have seen the damage that
imports can do to the market with what has
now been six months of poor demand and high
inventory and are less keen to ramp up prices
to the levels seen this time a year ago.

Units: Thousand Metric Tons

Improved demand in Europe is stimulating some interest for Asia to export; however, the current price level
makes exports unattractive for Asian producers despite a considerably lower styrene price. It is likely that as
Europeans look to expand margins in Q2 Asian interest will increase, although there will need to be significant
incentive to cover the risk of a market and price downturn.
Price levels for February have moved up versus January and producers have managed to
secure an increase in margin, at least versus
contract styrene. The price level for February
is 1335-1375 per ton, an increase of 50 per
ton from January.
The improvement in demand, a little earlier
than we had forecast, should allow producers to
cover styrene increases expected in March and
then further margin expansion during the second
quarter. Price levels will remain at import parity
until the wave of new capacity comes on line at
the start of 2009.

WEP Expandable Polystyrene (EPS) Producer

Euro per Ton
1800
Forecast

1600
1400
1200
1000
800
600
400
200
0
Jan 07

Jul 07

Jan 08

Raw Materials
Contract Margin

Jul 08
Variable Costs
Contract Price

February 22nd, 2008 / Issue No. 238

Jan 09
Fixed Costs

Jul 09

Page 16

European Market Report - Aromatics

MIXED XYLENES

MIXED XYLENES
Mixed Xylene Spot Prices West Europe Less U.S.
Dollars Per Ton
100
Forecast
80
60
40
20
0
-20
-40
-60
Jan-07

Jul-07

Jan-08

Jul-08

Jan-09

Jul-09

The chart shows that oil refiners had an improving price incentive in February to separate
xylenes from reformate.
While xylene prices remained remarkably
steady in February, blend values have generally
decreased. The premium for xylene over blend
value, therefore, increased from $102 per ton in
January to $122 so far in February.
For March, this premium is expected to shrink to
$35 per ton as higher xylene prices are outpaced
by big increases for blend value ahead of the
driving season.

West Europe Mixed Xylenes Alternative Values

Dollars per Ton
1200

Forecast
1000

800

600

400

200

-200
Jan-07

Jul-07

Spot Price

1000

800

600

400

200

Jul-08

Spot / Blend Value delta

Jan-09

Jul-09

Blend Value

The European spread between mixed xylene

and naphtha has increased slightly to an average
of $132 per ton so far in February. This is still
low by historical standards but does suggest
that, despite very high naphtha prices, reformer
margins are improving somewhat.
For March, we forecast the spread will increase
to $145 per ton and this improving trend towards
more normal levels will continue until May.
In distribution markets, FCA xylene prices
dipped in early February to 665 per ton ARA and
660 Germany but later recovered to 670-680
J
F
M
A
M
J
J
A
S
O
N
D
ARA and 680 Germany. Delivered prices also
Spot Value 2008
Naphtha 2008
MX Spot-Naphtha 2008
MX Spot-Naphtha 2007
~
recovered from early-month at 650 per ton deMX Spot-Naphtha 2006
MX Spot-Naphtha 2005
livered Benelux to 670-700 later in the month.
In Germany, most delivered prices remained at 670-700 per ton, little changed from January. Some low
FCA prices at the start of February reflected a need to secure business at a time of uncertain demand.

Dollars per Ton

1200

Jan-08

Europes spot xylene price has averaged $937

per ton FOB ARA so far in February compared
to $942 per ton for the whole of January. Prices
stopped sliding at the end of January and stabilised above $900 in early February with deals
were done in the range of $930-$940 per ton
FOB ARA. A labour strike at BP Geel had no
market impact. Since then, offers have jumped
up to $980 notional but with no bids.
Xylene supply into isomers has been steady
ahead of PX/OX shutdowns in Q2. However,
competition for molecules from gasoline has
reduced availability for the spot market.
The chart shows that European xylene prices
have been close to U.S. prices so far this month.
Thus trans-Atlantic trade has not been significant.

West Europe Mixed Xylenes Spread Over

Naphtha

February 22nd, 2008 / Issue No. 238

Page 17

European Market Report - Aromatics

ORTHOXYLENE

ORTHOXYLENE
The European February contract price was settled at 750 per ton free-delivered, a reduction
1400
Forecast
of 10 per ton from January. In early February,
1200
any producer ambitions for an increase waned
as crude prices dipped while the OX supply1000
demand balance weakened partly due to an
800
outage at Arkema.
The chart shows European producers retained
600
a reasonable price incentive to produce incre400
mental OX during February. The OX-MX
spread for February is expected to average
200
$162 per ton.
0
We have increased our forecast for the March OX
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
contract price from a rollover to an increase of 20.
~
MX OX spread
MX Spot
OX Contract
The change reflects current record-high prices
for gasoline, which may provide upward price pressure in negotiations due next week.
West Europe MX/OX Price Movement

Dollars per Ton

PX / OX Price Comparison
Dollars per Ton
1400

300
Forecast
250

1200

200
1000
150
800

100

600

50
0

400
-50
200

-100

0
Jan-07

-150
Jul-07

Jan-08

PX-OX (RHS)

Jul-08

WEP OX

Jan-09

WEP PX

Jul-09

PX-OX average (RHS)

West Europe Phthalic Anhydride Economics

Delivered Basis

Dollars per Ton

1400

Forecast
1200
1000
800
600
400
200
0
Q106

Q2

Q3

Q4

Q107

PAN Cash Cost

Q2

Q3

Q4

Q108

PAN Contract

February 22nd, 2008 / Issue No. 238

Q2

Q3

Q4

Q109

PAN Margin

Q2

Q3

Q4

Page 18

The chart shows the PX-OX spread has remained at about $50 per ton, which is less than
the historical average price delta between the
two isomers.
Continuation of low spreads into January/
February suggests a possible return to the
market conditions of 2007 when the delta was
either very low or negative. Those conditions
meant that isomer producers with operational
and contractual flexibility had a considerable
price incentive to increase OX recovery at the
expense of PX.
For March, our forecasts call for the PX-OX
delta to increase to $65 per ton. This increase
would mean that PX has not actually regained
its historical status as the preferred isomer to
produce.
The chart shows phthalic anhydride margins
remained high for most of 2007. More than
anything, this was due to demand consistently
exceeding expectations.
Since December 2007, PA margins have fallen
back towards more normal levels, especially as
new annual contracts have been implemented.
In particular, many annual 100% OX-related
contracts have been replaced by 50% OXrelated and 50% market-related contracts.
For 2008, on balance we expect PA margins
to be somewhat lower than 2007 as growth
in demand is expected to ease. However, this
forecast is already under review as import levels
appear to be falling and more PA turnarounds
are being scheduled for Q2/Q3.

European Market Report - Aromatics

PARAXYLENE

PARAXYLENE
Asia vs WEP PX Contract Prices
Dollars Per Ton
1400

WEP - Asia Net CP Dollars per Ton

60

Forecast
1300

50

1200

40

1100

30

1000

20

900

10

800

700

-10

The February contract price has been agreed

at 785 per ton which is 8 per ton below the
January settlement. Neither buyers nor suppliers are happy with the price as it is $25 per ton
higher than Asia on a net basis and producers
continue to lose money.
The spot market has been very quiet in the last
month with prices drifting downwards from
$1092 per ton to the current levels of $1040
per ton. During this period there has been some
end consumer buying as spot prices have been
cheaper than net contract prices.

-20

600
Jan-07

Jul-07

Jan-08

WEP - Asia NET PX CP

Jul-08

Jan-09

WEP PX CP

Jul-09

ASIA PX CP

PX Spot Prices 2007/2008

Spot Price Dollars Per ton
1400

140

1200

120

1000

100

800

80

600

60

400

40

200

20

0
07-Feb 14-Mar 18-Apr 23-May 27-Jun 01-Aug 05-Sep 10-Oct 14-Nov 19-Dec 23-Jan
Asia Spot - WEP Spot (RHS)
CFR Taiwan
Spot USGC

Asia Spot - US Spot (RHS)

Spot WEP

W. Europe Brent/Naphtha /PX Price Movement

Dollars per Ton
1400

Dollars per Barrel

100
Forecast

90
1200
80
1000

70
60

800

50
600

40
30

400

20
200
10
0
Jan-07

0
Jul-07

Jan-08

Jul-08

Naphtha
PX Contract

February 22nd, 2008 / Issue No. 238

Jan-09
Naphtha PX spread
Brent

There have been no reported plant problems in

the last month. A strike at a northwest European
producer forced them to declare force majeure
on mixed xylene and paraxylene imports to the
site at the beginning of February. The strike was
resolved within a couple of days. In Southern
Europe a producer has postponed a scheduled
turnaround from February into March because
of the threat of industrial action.
Paraxylene demand has been weak in the last
month as downstream bottle resin production
remains seasonally weak.

Jul-09

Page 19

In the last month we have seen Brent crude

rise from $87.5 per barrel to the current level
of $98.8 per barrel and gasoline rise over the
same period from $778 per ton to $888 per
ton. Whilst over the same period of time spot
paraxylene prices in Asia have increased from
a range of $1115-$1130 per ton to $1140-$1150
per ton. In Europe the spot price has actually
fallen by $52 per ton.

European Market Report - Aromatics

PARAXYLENE

For those paraxylene processes using mixed

xylene as the feedstock margins improved
Forecast
between January and February where mixed
400
xylene is transferred at blend value but have
remained static for those using market priced
200
mixed xylene, as the attached graph shows.
Paraxylene and mixed xylene prices fell be0
tween the two months by $12 per ton and $2 per
-200
ton, respectively. Whilst blend values, however,
decreased by $15 per ton. At the same time
-400
variable conversion costs also decreased by $6
per ton for the parex process and $10 per ton
-600
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
for the crystallisation process. Margins have
Mkt Xyl + Parex
Mkt Xyl + Cryst
Mkt Tol + STDP
~
Dist Xyl + Parex
Dist Xyl + Cryst
Ext Tol + STDP
also improved for the STDP process between
January and February.
Feedstock costs have increased by $4 per ton for toluene valued at market prices, but fallen by $29 per ton for
toluene valued at blend between the two months. At the same time the average value of the co-products benzene
and paraxylene increased from $989 per ton to $1007 per ton.
PX Cash Margins By Technology Before Tax

Dollars per Ton

600

Now that the Chinese New Year holidays are

over downstream demand for fibre is expected
to pick up during the course of March. At the
same time bottle resin should experience a
seasonal increase in demand in both Asia and
Europe.
On the supply side approximately 4% of world
capacity will be down in March with the bulk
of it in Asia. At the same time several mixed
xylene units will be down in the U.S., limiting
feedstock availability.

West Europe Xylene Alternative Values

Dollars per Ton
1400
Forecast
1200
1000
800
600
400
200
0
-200
Jan-07

Jul-07

Jan-08

MX

Jul-08

MX / Blend Value delta

Jan-09

Jul-09

Blend Value

PX

West Europe PX Production Cost

Delivered Basis
Dollars per Ton
1750

Forecast
1500
1250
1000
750
500
250
0
-250
-500
Q106

Q2

Q3

Q4

Q107

Avg Feedstock
Avg Fixed
Spot Price

Q2

Q3

Q4

Q108

Avg Variable
PX Price

February 22nd, 2008 / Issue No. 238

Q2

Q3

Q4

Q109

Avg Delivery
Margin

Q2

Q3

Q4

Page 20

In the course of the next few months gasoline

prices should start to rise as blenders in the U.S.
to build stocks ahead of the driving season. The
effect of this plus the mixed xylene shutdowns
should push feedstock costs upwards.
In Asia Nippon Oil and Idemitsu have nominated $1190 per ton and $1200 per ton, respectively, as the contract price for March. This
is an increase of $90-$100 per ton over the
February contract price. Given that spot prices
in Asia are $1140-$1150 per ton and demand
is only slowly increasing, we are forecasting
that the contract price will only increase by
$50 per ton.

European Market Report - Aromatics

PARAXYLENE

PX Reinvest Costs

In Europe as gasoline starts to rise in price

relative to crude, paraxylene producers will
Forecast
be pressing for higher prices due to rising
2000
1750
feedstock costs and the need to improve profit1500
ability. At the same time buyers will want the
1250
differentials to Asia to come back to parity.
1000
In these first two months of the year we have
750
seen that net European prices have been on
500
average just over $25 per ton higher than the
250
net Asian price. In the coming months we are
0
-250
forecasting that the differential between net
-500
European prices and net Asian prices will slip
Q1-06
Q3
Q1-07
Q3
Q1-08
Q3
Q1-09
Q3
to $20 per ton. The differential will not slip to
Wghtd AV BT margin
TOL@BV/STDP/CRYST
TAT@BV/Adsorp/ISOM
MX@BV/Adsorp/ISOM
~
parity as paraxylene producers will have to bid
Contract Price
mixed xylene away from the gasoline pool.
Although the differential may slip we do expect prices to increase in the coming months with the March price
rising to 815 per ton. During the course of Q2 prices are forecast to continue rising reaching a peak in June of
870 per ton.
Dollars per Ton
2250

A comprehensive study of the world xylenes & terephthalates industry to 2012

2008

WORLD XYLENES & TEREPHTHALATES ANALYSIS

For information or to order your copy, contact CMAI at
(281) 531-4660 or email cmai@cmaiglobal.com.

~
CHEMICAL MARKET ASSOCIATES, INC.

Houston - New York - Dubai - Dsseldorf - London - Shanghai - Singapore

www.cmaiglobal.com
Excellence
& Experience
in Consulting
since 1979
Excellence
& Experience
in Petrochemical
Consulting
since 1979.
Chemicals - Plastics - Fibers

February 22nd, 2008 / Issue No. 238

Page 21

European Market Report - Aromatics

PTA

PTA
PTA Comparison After Discounts
Dollars per Ton
1400
Forecast

1200
1000
800
600
400
200
0
Jan-07

Jul-07

Jan-08

Jul-08

Asia Contract
WEP Contract
WEP - Asia delta (RHS)

Jan-09

Jul-09

NAM Contract
Asia Spot delivered WEP

The net December contract price has been

settled 1 per ton lower than the paraxylene
raw material cost increase of 14 per ton. On
a net basis this made European PTA $84 per
ton higher in price than the cost of Asian PTA
delivered to European consumers.
In the last month demand for PTA has continued to be weak. This is partly due to the
normal seasonal weakness in bottle resin
demand. However, PET producers can also
see that glycol prices are falling and so they
are minimising their purchases as they do
not want to put expensive raw materials into
stock.

On operations a strike at a northwest European PTA producer delayed the restart of some plants following a
turnaround. The strike was quickly resolved and deliveries to customers were not affected. In Iran one line
of the PTA unit at Bandar Imam was taken down in early February because of mechanical problems. It is not
expected to return to production until the end of April.
January contract price discussions have only just started with producers wanting prices to increase by the rise
in paraxylene raw material costs of 14 per ton. Consumers on the other hand would like prices to be more
competitive with Asia and want the increase to be limited to 4 per ton.

In Asia, the PTA market has been very quiet

these last four weeks because of the holidays.
The spot PTA price has moved slightly from
a range of $855-$860 per ton to the current
1200
320
level of $865-$885 per ton. Over the same
timeframe spot paraxylene prices have moved
900
240
up from a range of $1115-$1130 per ton to
$1140-$1150 per ton. As a consequence, the
600
160
spread between spot PTA and 0.67 times the
spot paraxylene price increased from $105
300
80
per ton to $112 per ton before falling back
to $108 per ton.
0
0
In contrast the spread between contract PTA
Spread WEP PTA - 0.67*PX
Spread Asia PTA - 0.67*PX
and 0.67 times the contract paraxylene price
~
Asia PTA Spot
WEP PTA
in Western Europe has declined in the last
four weeks from a peak of $352 per ton to
the current level of $346 per ton.
The gap between net European PTA prices of $1109 per ton and net Asian prices of $846 per ton continues to
be significant. The difference in price is sufficient for Asian producers to be able to cover their costs in delivering to European customers and make a margin. As a result, Europe must be an attractive market for Asian
PTA producers and as previously reported it is no wonder that PTA imports have increased into the EU 25 in
the last year.
Asia & WEP PTA - PX Spreads

Dollars per Metric Ton

1500

Jan-07

Feb-07

Spread= PTA - 0.67 x PX

400

Apr-07

Jun-07

Aug-07

February 22nd, 2008 / Issue No. 238

Oct-07

Dec-07

Jan-08

Page 22

European Market Report - Aromatics

PTA

West Europe PTA Economics

Between December and January we expect

that PTA margins will fall by 15 per ton for
1400
two reasons. The weakness in demand will
Forecast
1200
result in producers only recovering 4 per
ton of the 14 per ton increase in paraxylene
1000
raw material costs. In addition margins will
800
also be impacted by higher acetic acid prices,
600
which we estimate will reduce margins by a
further 5 per ton.
400
Demand for PTA should start to pick up
200
in March as the bottle resin season gets
0
underway, with volumes increasing furJan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
ther in Q2. A combination of high demand
Feedstock
Variable
Direct Fixed
~
Avg Transport
PTA Contract
Margin
and a series of plant shutdowns in Q2
should cause the PTA market to tighten.
For Q1 due to the weakness in the market we expect that net PTA prices will fall by 15 per ton. However, in
Q2 as the market starts to tighten 10 per ton of the 15 per ton that were lost in Q1 should be recovered.
After Q2 we expect that PTA prices will start to weaken as supply increases following the start up of BPs
expansion at Geel.
Delivered Basis

Dollars per Ton

A comprehensive study of the world benzene industry to 2012

er
d ov
sente
e
r
p
Data a period rs
yea
even
of el
12

2002

2008

WORLD BENZENE ANALYSIS

- 20

For information or to order your copy, contact CMAI at

(281) 531-4660 or email cmai@cmaiglobal.com.

~
CHEMICAL MARKET ASSOCIATES, INC.

Houston
ousto - New York - Dubai - Dsseldorf - London - Shanghai - Singapore

www.cmaiglobal.com
Excellence
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in Petrochemical
Consulting
since 1979.
Excellence
& Experience
in Consulting
since 1979
Chemicals - Plastics - Fibers

February 22nd, 2008 / Issue No. 238

Page 23

European Market Report - Aromatics

PET

PET
The PET market in Europe has remained in the
doldrums in the last month. Demand which is
1,800
normally weak at this time of the year has been
below expectations. The reason for this is that the
1,600
glycol contract price in Europe was settled on a
1,400
net basis approximately $280 per ton higher than
1,200
the Asian contract price. The expectation is that
1,000
the glycol prices will fall significantly in March.
800
In order to come back to parity with Asia the price
600
will need to fall by 125 per ton. PET buyers
400
hope that this fall in glycol prices will translate
200
into lower PET prices and so demand was weaker
0
than expected.
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
~
In the last month prices have fallen from a range
Spot PET NEA
WEP PET
WEP PET - Spot PET NEA
of 1130-1180 per ton to the current levels of
1030-1100 per ton. The price fall has been driven by intense competition in the market and a Middle Eastern
producer placing material in Europe.
PET Prices

Dollars Per Ton

2,000

West Europe PET Economics

Discount Applied

Dollars per Ton

1800
1600
1400
1200
1000
800
600
400
200
0
-200
Jan-05

Jul-05
PX Component
MEG Component
Contract Price

Jan-06

Jul-06

Jan-07

Jul-07

PTA Component
Conv Costs and Other Raw
Margin

Jan-08

For March there have been no announcements of

price increases so far. The hope is that whilst raw
material prices will fall in March producers will
not have to pass this onto their customers.
Between January and February PET margins have
fallen by 24 per ton. Between the two months
raw material costs are forecast to fall by 34 per
ton. This assumes that net PTA prices fall by 10
per ton rather than by the 5 per ton decrease in
the paraxylene raw material cost. At the same
time PET prices fell between the two months by
59 per ton to give margin decrease of 25 per
ton. There was a small change in variable conversion costs between January and February which
brought the fall in margins to 24 per ton.

In February despite the fall in PET prices they

have still been higher than the cash cost of Asian
1400
500
PET delivered to Europe as the attached graph
Forecast
1200
400
shows.

In March PET demand is expected to improve

1000
300
with the start of the bottle resin season. At the
800
200
same time raw material costs should decline
due to glycol falling significantly in price.
600
100
This fall will however be mitigated by PTA
400
0
prices rising driven by increasing paraxylene
200
-100
costs. Across Q2 we expect to see raw material rising in cost driven mainly by escalating
0
-200
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
paraxylene costs and higher PTA prices due to
WEP PET - ASP CC
WEP PET PRICE
~
a tightening supply-demand balance in Europe.
ASP Cash Cost Delivered Europe Inc Discounts
As a consequence, we are forecasting that prices for PET will roll over from February to March, as the increased demand should
help to tighten up the market. Across Q2 with the greater demand we are forecasting that the PET
price rises will be higher than the raw material cost increases, resulting in higher PET margins.
Comparison of WEP PET Prices with Asian Cash
WEP PET - ASP CC
Costs

Euro per Ton

February 22nd, 2008 / Issue No. 238

Delivered WEP /t

Page 24