Asian Markets
October 8, 2021
Energy Price Increases Hit Korea
Soaring LPG prices rapidly deteriorate Korean petrochem makers’ profitability
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A sharp surge in liquefied petroleum gas (LPG) prices driven by a surge in oil prices is threatening the profitability of South Korean petrochemical companies that heavily relay on propane to produce plastic materials.
According to industry sources on Tuesday, LPG prices soared nearly 30 percent in seven months from over $500 per ton in March to over $800 in September. The higher crude oil prices have led to a jump in LPG prices given that LPG is produced in the process of refining crude oil. The recent hike, however, is seen as excessive, sources say.
The anticipated higher demand for heating during the upcoming winter season should hike LPG prices further, industry observers concerned.
With the surge in LPG prices, Korean petrochemical companies are rapidly losing profit because they rely on import propane to make and sell plastic products.
Removing hydrogen from LPG-categorized propane creates propylene, which is a feedstock to make plastics. Petrochemical companies usually produced naphtha from crude oil before changing it to propylene but because the abundant supply of U.S. Shale gas had helped significantly lower LPG prices, producing propylene using propane began to generate more profit.
In recent years, major Korean petrochemical players such as Lotte Chemical, LG Chem, and Hanwha Total, expanded facility that produces propylene using propane. With the surge in LPG prices, however, the companies started losing price competitiveness.
Industry sources noted that in general, producing propylene using LPG creates more profit when LPG price per ton falls to below 90 percent of naphtha.
Until last year, LPG prices were kept low, leading many petrochemical companies to rush to ramp up propylene production using LPG instead of naphtha. But tith LPG prices hitting multi-year highs near naphtha prices, local petrochemical players are under mounting pressure to change their feedstock diversification strategies.
October 8, 2021
Chinese Adipic Acid Podcast
Asia ADA markets face supply uncertainty amid China’s dual control policy
Author: Jasmine Khoo
2021/10/07
SINGAPORE (ICIS)–Asia’s adipic acid (ADA) markets face supply uncertainty amid operating rate cuts in China due to the dual control policy. Volatility in the feedstock benzene markets has also put pressure on ADA production. Firm pricing in the related methylene diphenyl diisocyanate (MDI) markets has also dented ADA buyers’ confidence. In the seasonal downstream lull, buyers have also remained on the sidelines due to a lack of buying urgency.
- Feedstock benzene exerts pressure on ADA amid gains
- Seasonal lull plagued cargo uptake in Asia in Q3
- Asia MDI supply snug on planned maintenance
In this podcast, Jasmine Khoo speaks with editor Zhi Xuan Ho about recent developments in the Asian ADA market.
October 8, 2021
Chinese Adipic Acid Podcast
Asia ADA markets face supply uncertainty amid China’s dual control policy
Author: Jasmine Khoo
2021/10/07
SINGAPORE (ICIS)–Asia’s adipic acid (ADA) markets face supply uncertainty amid operating rate cuts in China due to the dual control policy. Volatility in the feedstock benzene markets has also put pressure on ADA production. Firm pricing in the related methylene diphenyl diisocyanate (MDI) markets has also dented ADA buyers’ confidence. In the seasonal downstream lull, buyers have also remained on the sidelines due to a lack of buying urgency.
- Feedstock benzene exerts pressure on ADA amid gains
- Seasonal lull plagued cargo uptake in Asia in Q3
- Asia MDI supply snug on planned maintenance
In this podcast, Jasmine Khoo speaks with editor Zhi Xuan Ho about recent developments in the Asian ADA market.
October 3, 2021
Plus a 10 Day National Holiday
A Dip In Shipping Rates: The End Of The Nightmare, Or Just The Eye Of The Hurricane
by Tyler DurdenSaturday, Oct 02, 2021 – 07:00 PM
This year, spot ocean container rates have reached record highs and could be at a crucial inflection point this week. News of 40-foot container rates on the world’s most important shipping lane, that is, China and the U.S., plunged amid a power crunch shutting down factories across multiple Chinese provinces leading speculators to sell their shipping spots, according to Chinese media outlet Caixin Global.
Caixin spoke with an executive at a Shanghai freight company Thursday who said 40-foot container rates from China to the U.S. West Coast sank this week, plummeting from $15,000 to just $8,000. For the same container, the spot rate for China to the U.S. East Coast dropped from $20,000 to around $15,000.
The decline in international shipping costs is primarily due to at least 20 Chinese provinces and regions making up more than 66% of the country’s GDP have announced some form of power cuts in recent weeks, which has shuttered energy-intensive manufacturing industries and so their need for containerized shipping has diminished.
We have noted Foxconn, the world’s biggest iPhone assembler and a key supplier of Apple and Tesla, halted production earlier this week. Another Apple supplier, Unimicron Technologies, suspended operations. There are countless reports of other energy-intensive companies that suspended operations.
An analyst at Tianfeng Securities Co. Ltd. said the decline in shipping rates was primarily caused by the imminent off-season and a reduction in manufacturing due to China’s power crunch. The analyst said rates should decline as export growth in China will decrease in the fourth quarter, and seasonally ocean freight slows down.
A report by CSC Financial Co. Ltd. outlined rates will stay stubbornly high for the next two weeks as port congestion remains a problem in China and the U.S. But after that, rates may stall on slow growth from China.
We so far understand China’s power crunch is having a sizeable impact on economic growth and has resulted in a slump for containerized shipping demand. What comes next is either shipping rates continue a downward spiral or bounce back as China will ultimately restart its manufacturing base near term.
https://www.zerohedge.com/commodities/dip-shipping-rates-end-nightmare-or-just-eye-hurricane
October 3, 2021
Plus a 10 Day National Holiday
A Dip In Shipping Rates: The End Of The Nightmare, Or Just The Eye Of The Hurricane
by Tyler DurdenSaturday, Oct 02, 2021 – 07:00 PM
This year, spot ocean container rates have reached record highs and could be at a crucial inflection point this week. News of 40-foot container rates on the world’s most important shipping lane, that is, China and the U.S., plunged amid a power crunch shutting down factories across multiple Chinese provinces leading speculators to sell their shipping spots, according to Chinese media outlet Caixin Global.
Caixin spoke with an executive at a Shanghai freight company Thursday who said 40-foot container rates from China to the U.S. West Coast sank this week, plummeting from $15,000 to just $8,000. For the same container, the spot rate for China to the U.S. East Coast dropped from $20,000 to around $15,000.
The decline in international shipping costs is primarily due to at least 20 Chinese provinces and regions making up more than 66% of the country’s GDP have announced some form of power cuts in recent weeks, which has shuttered energy-intensive manufacturing industries and so their need for containerized shipping has diminished.
We have noted Foxconn, the world’s biggest iPhone assembler and a key supplier of Apple and Tesla, halted production earlier this week. Another Apple supplier, Unimicron Technologies, suspended operations. There are countless reports of other energy-intensive companies that suspended operations.
An analyst at Tianfeng Securities Co. Ltd. said the decline in shipping rates was primarily caused by the imminent off-season and a reduction in manufacturing due to China’s power crunch. The analyst said rates should decline as export growth in China will decrease in the fourth quarter, and seasonally ocean freight slows down.
A report by CSC Financial Co. Ltd. outlined rates will stay stubbornly high for the next two weeks as port congestion remains a problem in China and the U.S. But after that, rates may stall on slow growth from China.
We so far understand China’s power crunch is having a sizeable impact on economic growth and has resulted in a slump for containerized shipping demand. What comes next is either shipping rates continue a downward spiral or bounce back as China will ultimately restart its manufacturing base near term.
https://www.zerohedge.com/commodities/dip-shipping-rates-end-nightmare-or-just-eye-hurricane
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