Price trends of oil, polymer feedstock and commodity polymers in Asia for the week ended April 10, 2011

14-Apr-11
CRUDE OIL World oil price jumped in the week of April 10, 2011, to the highest levels since 2008. New figures from USA that showed reduced unemployment amid unrest in the Middle East have propped up oil prices to two year highs. A government report showed that US employers added more jobs than forecast last month. Payrolls increased by 216,000 in March, jobless rate dropped to 8.8% from 8.9%, the fourth straight decrease. An increase in employment figures signifies a possible increase in oil demand in USA. Brent North Sea crude for delivery in May rose past US$124, the highest price since early August 2008. New York’s main contract, light sweet crude for delivery in May, soared past US$111 - a level last seen in September 2008. NAPHTHA Naphtha prices have spiked past US$1050/MT in Asia in the week of April 10, 2011. CFR Japan naphtha ended the week at US$1055/MT. This week has seen a rare reversal of the usual arbitrage flows- Around 150,000 tons of naphtha will be shipped from the Middle East to the West, as European naphtha prices flip to a premium at Asian levels this week. Flows from the Middle East could continue to move West instead of to Asia if refinery maintenance and strong demand from the United States and Brazil continue to support European markets. This rise comes amid a period of cracker maintenance currently underway in Asia. The cracker maintenance in North Asia over April and May should technically exert downward pressure on naphtha prices. However, demand for naphtha in Asia might still hold up despite the maintenance, with limited supply from the Middle East due to refinery maintenance. Demand continues to be weak in Asia although JX Nippon Oil and Maruzen have restarted their crackers. Mitsubishi Chemical Holdings Corp’s Kashima units are the two crackers that are still offline-with a total nameplate capacity of 851,000 tpa, wiping out around 52,000 tons of naphtha demand a week. ETHYLENE Despite rising crude and naphtha, ethylene prices have steadied at US$1325/MT FOB Korea, in the week of April 10, 2011, amid lackluster trading in China. Markets have been dull as some of the derivatives weaken and also on a decision by the Chinese government to raise interest rates for a second time this year. However, most offers have been heard hovering around the U$1400 mark, with buying intentions pegged in the low 1300s. Prices spiked at the beginning of the week as Shell continues force majeure on ethylene and monoethylene glycol. In plant news, Maruzen Petrochemical has restarted its 520,000 tpa Chiba cracker, JX Nippon Oil & Energy expects 100% run rates at the restarted 460,000 tpa Kawasaki naphtha cracker, Showa Denko KK is running its 690,000 tpa naphtha cracker in Oita at 100%, post-repairs. Following crackers have been shut for maintenance: YNCC’s 857,000 tpa No 1 cracker in Yeosu, Korea Petrochemical Industry Co’s 470,000 tpa naphtha cracker and an olefins conversion unit (OCU), which can produce 110,000 tpa of propylene, Honam Petrochemical’s 750,000 tpa naphtha cracker in Yeosu. PROPYLENE Propylene prices have dipped to US$1540/MT in Asia in the week of April 10, 2011 on slow demand from China. Over the past weeks, spot propylene prices have been moving higher across the globe due to tight supply conditions resulting from scheduled turnarounds at a number of crackers in Europe and Asia as well as unplanned outages resulting from the March 11 earthquake in Japan, as per Chemorbis. The ongoing political turmoil in the Middle East has also played a role in keeping global propylene prices firm as crude oil and naphtha prices rise to highest levels seen over the past three years. When compared with the beginning of March, spot propylene prices have gained nearly US$70/ton. Korean exporters reported that availability within the country is limited due to a heavy cracker maintenance season while demand remains strong given the lack of export offers from Japan following the March 11 earthquake. EDC Ethylene dichloride prices have dipped to US$530/MT in the week of April 10, 2011, despite rising feedstock costs and bullish sentiments in downstream PVC. VCM VCM prices have firmed to US$990/MT in Asia in the week of April 10, 2011 amid persistent limited supplies that have intensified with plant shutdowns in Japan. Extremely tight VCM supplies in Southeast Asia have caused some producers in the region to shut their plants. Healthy demand for imports, as well as rising domestic prices in Southeast Asia in the face of a shortage of local and Japanese cargoes were cited as the main reasons behind the bullish trend across the region. STYRENE MONOMER Styrene prices have spiked to US$1400/MT in Asia in the week of April 10, 2011. Spot styrene mostly tracked a downward trend during March in both Asia and Europe, as per Chemorbis. However, this trend reversed with firmer prices seen at the beginning of April in line with bullish developments in the upstream markets, pulling oil and subsequently benzene prices higher. Bullish upstream developments as well as an optimistic outlook regarding China’s EPS market contributed to this recovery. Meanwhile, spot benzene prices, supported by higher oil prices and strong buying interest, recorded US$35/ton increases since the beginning of April and propped up the styrene market in Asia. Earlier reports that the Chinese government was to undertake a review of their proposed new building material safety regulations, by which the usage of EPS in China’s construction sector could have been made impossible. However, it was later reported that despite the initial draft, some softening was observed on these safety regulations in at least one of the Chinese provinces which led to a revival in the EPS market. POLYMERS China’s Central Bank has increased interest rates for the second time this year. As credit gets dearer, most converters prefer to buy need-based as they anticipate price amendment driven by weak demand. As credit tightens, some traders preffered to off-load cargoes at discounts in a bid to ease cash-flow, as well as attract buying interest in a lacklustre market. Buyers in other Asian regions also prefer to wait in the sidelines in anticipation of a price correction amid feeble Chinese demand. Thai markets are closed until April 17, affecting demand. Overall market sentiments are pessimistic and are likely to hamper efforts to hike prices in line with rising energy prices. HDPE HDPE prices steadied at US$1345-1350/MT in Asia in the week on April 10, 2011 in a lacklustre market, as both buyers and sellers seem unwilling to relent. Since a very small gap exists between offers and costs, sellers are unwilling to reduce offers. However, buyers prefer to wait in the sidelines and are buying need based only. CFR China offers for March shipment were heard around US$1375/MT, while deals were heard concluded at US$1355/MT. LDPE LDPE prices dropped to US$1685/MT levels in Asia in the week of April 10, 2010, in a dull market where most buying was by converters on are were inter-trader deals. Traders saddled with high stocks in Hong Kong have concluded deals at US$1710/MT levels. CFR China offers for next month shipment were heard at US$1755-1795/MT levels from the Middle East, at US$1725/MT from Malaysia. Most deals on the high end were concluded near US41700/MT levels. LLDPE LLDPE prices have fallen to US$1390/MT in Asia in the week of April 10, 2011, amid weak buying sentiments and bearish outlook. The gap between HDPE film from LLDPE film prices in Southeast Asia has narrowed considerably over the past few weeks, with the two currently trading almost at par with each other, as per Chemorbis. Comparatively better demand for HDPE film, high LLDPE film stocks in China dampening demand, and the high season for agricultural film that has passed, have helped narrow the gap. Prices have also found support from the recent uptrend in upstream costs that has exerted greater upward pressure on HDPE film prices than on LDPE/LLDPE film prices as HDPE film prices had been trading well below the other products at the start of the current upward movement in costs. Southeast Asian players have been closely following developments in the Chinese market as poor demand inside China has resulted in a steady inflow of re-export offers from Chinese traders, with some Chinese origins also appearing in Southeast Asia’s import market over the past few weeks. Re-export offers for both HDPE and LLDPE film were received from China once again this week, although sources inside China report that the country’s LLDPE film stocks are comparatively higher than the country’s HDPE film stocks and that traders are under more pressure to sell their LLDPE film materials for now. POLYPROPYLENE PP prices have fallen to US$1630/MT in Asia in the week of April 10, 2011 amid feeble trade and waning demand amid reduced prices in domestic markets of China. Amid high feedstock costs, offers from producers continue to be high. However, traders have reduced offers in a bid to ease cash-flow, as well as attract buying interest in a lacklustre market. Market outlook continues to be unclear as supply is expected to tighten in Q2-11 due to a spate of maintenance shutdowns at plants in MiddleEast and Asia, and demand does not seem to be picking up. POLYVINYL CHLORIDE Polyvinyl chloride prices have risen to US$1165/MT in Asia in the week of April 110, 2011 on limited avails. Several PVC plants have been shut in Japan, including Kaneka's 178,000 tpa Kashima plant, Shin-Etsu's 550,000 tpa Kashima plant and Taiyo Vinyl's 90,000 tpa plant at Chiba. Supply concerns abound in Asia in light of obstruction of almost 50% of PVC capacity in Japan, mostly located in the earthquake ravaged areas. Also, as Japan embarks on reconstruction efforts, PVC demand has increased, making exports of PVC from Japan almost impossible. Higher offers and sell ideas are in line with players' expectations given scarce VCM supplies in Southeast Asia and tighter import availability to China as a result of the March 11 earthquake in Japan. PET In line with higher upstream costs, PET prices in Asia have been following a firm trend for a long time. In the week of April 10, 2011, the situation has changed due to softening feedstock costs as well as comfortable stock levels with buyers, as per Chemorbis. Spot PX prices lost US$77/ton FOB Korea from last week, while spot PTA and MEG prices lost US$75/ton and US$90/ton, CFR China basis, vs last week. Current spot figures are also lower when compared with early March levels. From early March levels, spot PX prices indicate decreases of US$25/ton, PTA prices represent US$60/ton and MEG prices show US$145/ton decreases. Weaker demand from the polyester sector is also reported to be amongst the reasons for lower PTA and MEG figures. Lower feedstock costs pushed producers to concede to decreases amid strong resistance growing on the buyers’ side. However, these cuts were not good enough to revitalize the buying interest in the market and therefore, some producers started to mull over lowering operating rates considering their dissatisfying sales performances. Meanwhile, due to lack of confidence regarding the market trend, distributors preferred to stay away from building up stocks. Some bottle makers also complain about their disappointing end product businesses and they do not want to exceed their minimum needs when making fresh purchases despite the approaching high season. Over the short term, the bearish sentiment is expected to prevail in the PET market considering the softer upstream costs. However, with the high season being just around the corner, this downward trend is not anticipated to be a long lasting one.
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