Yesterday, Ineos provided a relatively healthy market update for January. Operating rates and cracker product contract prices are both up. More importantly, sentiment in the polymers space has turned positive, following a significant decline observed in recent quarters. Market conditions for Chemical Intermediates have improved visibly, as customers seek to build inventory following a considerable lull in order intake.
All three key product groups (nitriles, oxides and phenols) have reported strengthening market sentiment and consequently firmer prices since the beginning of the year. Heightened tensions between Iran and the US and the implied threat to the security of oil supplies through the Strait of Hormuz have kept oil and naphtha prices at high levels, leading to a shift in focus towards maintaining a security of supply. Even though part of this development may be temporary, the fact remains that inventories cannot remain at these unsustainable levels.
The improvement in Ineos’ operating rates (above market average) reflects the market’s dependency on Ineos as a secure supplier. In other news, Ineos has indicated that there will be a c. 45 day maintenance shutdown in the Grangemouth refinery in Q3/12.