Quarterly Update on Linear Alkyl Benzene (LAB) Market
For the Quarter Ending June 2021
Despite of volatility in prices of feedstock Benzene, prices of Linear Alkyl Benzene (LAB) increased effectively increased throughout the quarter. The demand for Linear Alkyl Benzene remained sturdy to support the prices, while the availability remained tight due to lower inventory levels across the region. In addition, demand from downstream detergent and LABSA remained high that supported the overall price trajectory for LAB during this timeframe. In addition, the demand from the global market remained strong in the meantime, while the suppliers were anxious about unstable transportation activities, where the freight cost was shot up rapidly across prime trade route.
Asian market encountered firm demand for Linear Alkyl Benzene (LAB) during Q2 2021, backed by ample offtakes from downstream surfactant sector. In the Indian market, demand remained sturdy from downstream detergent manufacturers, under the second wave of COVID pandemic in the country. Therefore, prices of LAB accessed as USD 1952/MT during the final week of the quarter in India. In addition, IOCL and Gujarat government signed a MoU to provide infrastructure facility that includes tank truck loading facility for LAB, which is a small part of the big investment that aims to boost the production as well as transportation of several important commodities.
European manufacturers witnessed a stable demand outlook for LAB during this quarter, backed by sturdy demand from domestic and international market. Rising production cost was also marked as a major concern, which led to an effective hike in commodities prices. Meanwhile, Cepsa, a major oil and chemical giant of Spain, successfully switched the manufacturing process of LAB for environmental safety. This new process is expected to reduce the waste and water consumption during the LAB manufacturing process.
For the Quarter Ending March 2021
Devastated production activities across the US Gulf coast halted the overall output of LAB across the region. Amidst freezing weather, several major refineries like ExxonMobil, Total, Shell etc. faced unplanned turnarounds that reduced the availability of all prime upstream chemicals like feedstock Benzene. USA faced critical shortage of Benzene, which affected the prices of almost all the downstream chemicals including LAB. It is estimated that more than 74% of total Benzene output was halted during this period, which made the LAB prices to shoot up during the quarter.
The Asian market observed mixed sentiments during this quarter, the demand remained firm from downstream detergent segments and varied country wise across the region. Sturdy crude oil values and lower spot availability of Benzene supported the price of LAB during this quarter. Hence prices of LAB followed an upward trend across the region. In the Indian markets, LAB value surged from USD 1383.7per MT (January 2021) to USD 1467.5 per MT (March 2021) despite stable demand fundamentals in the market.
Unlike the Asian and North American countries, Benzene prices in the European region followed a downward trajectory backed by adequate availability and feeble demand. Second wave of COVID-19 impacted the functionality of downstream industries, hence the demand for LAB remained low from downstream segments. However, high freight cost and shipping container shortage supported the export prices for the region.
Discussions in the Asian Linear Alkyl Benzene (LAB) market were mostly thin for the quarter ending September 2020. Although negligible change was observed in demand fundamentals due to the pandemic, negotiations prompted by the traders to initiate better offtakes shrouded the contract prices due. Nonetheless, the skyrocketing demand from the detergent and cleaning industry failed to provide prominent gains as manufacturers flooded the market with excess supply. However, with consistent growth in market sentiments of feedstock Benzene, the hovering outlook of LAB is anticipated to bounce back by the next quarter.
With increased consumption from surfactants and cleaning products as a preventive measure of the global contagion, the demand for Linear Alkyl Benzene in the region has witnessed appreciable gains. However, with reduced panic procurement and stockpiling of the product, the market fundamentals of LAB have considerably stabilized. Manufacturers have suffered fall in their profit intakes on mounting inventories of the product and no severe cut implemented in the operating rates. However, LAB market dynamics are likely to trace fast recovery with surface chemical industry continuously experimenting with new products expressing optimism over improved demand by the next quarter.
The third quarter for the LAB market in Europe remained firm with continuous demand for surface cleaning products under strict industrial practices to maintain hygiene. Consumption of LAB in the surfactants and derivatives further exacerbated with resurgence of the coronavirus contagion in several parts of the region. With no planned turnaround in the near term, market players were cautious over supply outstripping the demand that ultimately led to reduced profit margins. As there are no hopes for complete abatement of the virus till date, the demand is likely to observe no appreciable change in future.