Petroleum Wax Supply and Demand -Marketplace...

Petroleum Wax Supply and Demand - Marketplace Issues

Stephen BurnsManaging Editor, Americas

ICISwww.icis.com

http://www.icis.com

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ICIS is part of Reed Business Information (RBI), the publisher of more than 100 market-leading publications and online services, as well as the organizer of leading industry conferences and awards.

RBI, a division of Reed Business, is a member of Reed Elsevier plc, which reported revenues of around $8bn in 2004.

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Unbiased, independent and reliable pricing information

ICIS pricing - the market�s most respected pricing service for more than 100 global commodity markets

� Spot and contract price assessments� Market commentary on trends and business developments� Transactions reported and confirmed� Plant and production news

Weekly price reports

ICIS methodology for paraffin wax price assessments

� Traced transactions and contract negotiations

� Supply/demand balance and export/import information

� General sentiment for price direction

� Upstream, downstream developments

� General market intelligence

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�Market-moving news, key data and incisive analysis� Comprehensive coverage of emerging markets including China, Russia and Latin America� A global perspective from a global network of correspondents � Regional expertise and market knowledge

Real-time news service

Once upon a time�

�The Company buys a variety of raw materials for inclusion in itsproducts. The only raw material that is considered to be of a commodity nature is wax. Wax is a petroleum-based product. However, its market price has not historically fluctuated with the movement of oil prices. Rather, over the past five years wax prices have generally moved with inflation.�

(Yankee Candle�s Form 10-K filing with the SEC, 2001)

Feedstock costs bite hardHigh paraffin wax prices hurt Yankee Candle Q4 net15 February 2006 21:55 [Source: ICIS news]

BUENOS AIRES (ICIS news)--Yankee Candle, a leading US scented-candle manufacturer and marketer, said on Wednesday its fourth-quarter net income fell almost 10%, in part due to higher paraffin wax prices.

The company had net income of $43.4m (Euro36.5m) in the fourth quarter of 2005, compared with a year-earlier profit of $48m.

North American paraffin wax prices hit all-time highs in 2005, driven by soaring petroleum prices, unprecedented tightness in supply due to post-Hurricanes Katrina and Rita production curtailments and continued demand strength in downstream markets.

Low- to mid-melting-point fully refined paraffin wax prices peaked in third quarter 2005, hitting levels in the mid 40s cents/pound FOB US Gulf, which represented increases of nearly 10 cents/pound or almost 30% from a year ago, according to ICIS-LOR.

Halfway through first quarter 2006, North American paraffin wax prices were poised for further increases, however, as a pre-existing tight wax-supply scenario was being exacerbated by regional production issues and rising imported wax prices.

Founded in 1969, Yankee Candle is headquartered in South Deerfield, Massachusetts and employs about 5,500.

ICIS Copyright © Reed Business Information 2005

Key wax market drivers in 2005

� High crude oil prices

� Hurricane impact

� Core global demand up

� A whole new ball game for buyers

US Gulf prices in 2005

Source: ICIS pricing

PA RA FFIN WAX : MELT POINT 125F (52C) TO 140F (60C) In US Gulf SPOT FOB USG. Quoted in USD-MT.

30.98

32.98

34.98

36.98

38.98

40.98

42.98

44.98

46.98

48.98

05-Jan-2005 05-Apr-2005 05-Jul-2005 05-Oct-2005 05-Jan-2006

CT

S /

LB

D a te ra n g e : 0 1 J a n 2 0 0 5 - 3 1 D e c 2 0 0 6 . D i s p la ye d i n C T S - L BD a te ra n g e : 0 1 J a n 2 0 0 5 - 3 1 D e c 2 0 0 6 . D is p la ye d in C T S - L B

D a te


European prices in 2005

PARAFFIN WAX : MELT POINT 52-54 DEGREES CENT In Europe DOMESTIC FD NWE. Quoted in USD-MT.

31.30

33.30

35.30

37.30

39.30

41.30

43.30

05-Jan-2005 05-Mar-2005 05-May-2005 05-Jul-2005 05-Sep-2005 05-Nov-2005

CT

S /

LB

D a te ra ng e : 0 1 J a n 2 0 0 5 - 3 1 D e c 2 0 0 5 . D i s p la ye d i n C T S - L BD a te ra ng e : 0 1 J a n 2 0 0 5 - 3 1 D e c 2 0 0 5 . D is p la ye d i n C T S - L B

D a te


Asia-Pacific prices in 2005


PARAFFIN WAX : SLAB SOLID WAX MP 52/54 TO 56/58C In Asia Pacif ic SPOT SEMI REFINED. Quoted in USD-MT.

26.31

28.31

30.31

32.31

34.31

36.31

38.31

05-Jan-2005 05-Apr-2005 05-Jul-2005 05-Oct-2005 05-Jan-2006

CT

S /

LB

D a te ra n g e : 0 1 J a n 2 0 0 5 - 3 1 D e c 2 0 0 6 . D i s p la y e d i n C T S - L BD a te ra n g e : 0 1 J a n 2 0 0 5 - 3 1 D e c 2 0 0 6 . D i s p la ye d i n C T S - L B

D a te


The China factor

� GDP growth lifting domestic demand, oil imports

� Wax content of China�s crude oil imports is perceived to be falling

� China�s wax exports can�t cover extra global demand

� Tax rebate change drives up export price

China�s exports to US shrinking

0

50

100

150

200

250

300

350

2003 2004 2005

M i l l i ons of

k i l ogr amsOther

Venezuela

India

Germany

Japan

Canada

China

US wax imports (Source: ITC)

China�s supply dominance

(Source: ITC)

Percentage share of US wax imports in 2003

54

14

9

23

China

Canada

Japan

Others


(Source: ITC)


68

13

7

12

China

Canada

Japan

Others


(Source: ITC)


51

17

14

17

China

Canada

Japan

Others

Importers on growth path

� North America growing at a moderate clip, economic outlook positive

� Brazil and Argentina engines for Latin American expansion

� Steady appetite in Europe

Other supply issues:feedstock competition

� High margins drawing slackwax into fuels stream

� No demand plateau in sight for transport fuels

� MTBE phase-out altering dynamics

Other supply issues:hurricane impact

� Key refineries affected: Baton Rouge, Beaumont, Lake Charles

� Some wax blendplants affected - Pass Christian

� Railroad problems added to logistical issues

Other supply issues: problems in related markets

� Petro-Canada�s Mississauga white oils plant fire on January 7

� Shell Canada restart issues in Montreal after turnaround

� Q1 06 story: allocations, tight supply

Q1 2006 base oil plant toll � ConocoPhillips: Westlake, Louisiana

plant explosion on February 1

� ExxonMobil: fire at Port Jerome (Gravenchon, France) on February 6

� Penreco: Karns City, PA plant hit by strike

US prices still rising in 2006�

PA RA FFIN WA X : MELT POINT 125F (52C) TO 140F (60C) In US Gulf SPOT FOB USG. Quoted in USD-MT.

30.98

32.98

34.98

36.98

38.98

40.98

42.98

44.98

46.98

48.98

05-Jan-2005 05-A pr-2005 05-Jul-2005 05-Oc t-2005 05-Jan-2006

CT

S /

LB

D a te ra n g e : 0 1 J a n 2 0 0 5 - 1 5 M a r 2 0 0 6 . D i s p la ye d i n C T S - L BD a te ra n g e : 0 1 J a n 2 0 0 5 - 1 5 M a r 2 0 0 6 . D i s p la ye d i n C T S - L B

D a te


43.45

44.45

45.45

46.45

47.45

48.45

49.45

50.45

04-Jan-2006 17-Jan-2006 30-Jan-2006 12-Feb-2006 25-Feb-2006 10-Mar-2006 23-Mar-2006 05-A pr-2006

CT

S /

LB

D a te ra n g e : 0 1 J a n 2 0 0 6 - 0 6 A p r 2 0 0 6 . D i s p la ye d in C T S - L BD a te ra n g e : 0 1 J a n 2 0 0 6 - 0 6 A p r 2 0 0 6 . D is p la ye d i n C T S - L B

D a te

...along with Europe�


30.98

32.98

34.98

36.98

38.98

40.98

42.98

44.98

46.98

48.98


CT

S /

LB


D a te


43.45

44.45

45.45

46.45

47.45

48.45

49.45

50.45


CT

S /

LB


D a te

PA RA FFIN WA X : MELT POINT 52-54 DEGREES CENT In Europe DOMESTIC FD NWE. Quoted in USD-MT.

41.46

42.46

43.46

44.46


CT

S /

LB


D a te

�but Asia coming off the boil


30.98

32.98

34.98

36.98

38.98

40.98

42.98

44.98

46.98

48.98


CT

S /

LB


D a te


43.45

44.45

45.45

46.45

47.45

48.45

49.45

50.45


CT

S /

LB


D a te

PA RA FFIN WA X : SLA B SOLID WA X MP 52/54 TO 56/58C In A s ia Pac if ic SPOT SEMI REFINED. Quoted in USD-MT.

36.29

37.29

38.29

39.29


CT

S /

LB


D a te

Current market factors � Severe supply disruptions in the base

oils chain

� Low inventories in Latin America

� Firm prices for Chinese exports

� Interest in alternatives

Outlook for 2006

� Pressure on margins � how far can costs be passed on?

� Strong incentives to explore alternatives � Issues for alternatives � impact on

quality, color, fragrance� North American supply picture to

stabilize in Q2?� Long-term future for base oils market

Thank you!

Stephen BurnsManaging Editor, Americas

[email protected]

www.icis.com

mailto:[email protected]

http://www.icis.com

Petroleum Wax Supply and Demand -Marketplace...

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