Oil prices continue to move south in the week of August 23, 2010. The dip has been persistent amid sell-off in stocks and a strengthening dollar. On the economic front, the US Economic Cycle Research Institute’s index for future economic growth fell to a 3 week low last week. Fears about a slowing recovery triggered risk aversion in the market, sending the dollar higher vs the euro and the sterling pound. Light, sweet crude for September delivery settled at US$73.4 on the Nymex, plummeting to six week lows as rising jobless claims in USA bolstered concern about the recovery of the US economy. Total inventories of crude and fuel in USA peaked to the highest level in atleast two decades.
Despite oil prices plunging to near six week lows, and expected to continue to journey south on rising economic recovery concerns, naphtha prices have moved north in Asia. Open-spec prices for H2-September delivery settled at US$675/MT CFR Japan amid robust demand. Demand was propped by Formosa Petrochemical’s purchase of 200,000-230,000 tons for September arrival in a span of a week despite the continued shutdown at its 700,000 tpa No. 1 cracker. The strong sentiment was also driven by the tightly shut West-East arbitrage window after arrival of over 1 mln tons of naphtha in Asia from May to July. Market sentiments took a hit after about 1 mln tons of Middle Eastern naphtha found its way into the spot markets and was sold for July-August loading. But many market players expect the uptrend in Asia to be short-lived with a limited ascent in Indian premiums due to an unusual rise in prices amid unchanged fundamentals. Also, the West-East arbitrage window is anticipated to reopen as the Asian open-spec naphtha differential to Northwest Europe prices changes.
Amid robust demand from derivatives polyethylene and MEG makers, ethylene prices have risen to US$935/MT in Asia in the week of August 23, 2010 amid news of unscheduled shutdowns at major production sites. The market started to move higher toward end of July, after which prices have followed a steadily firming trend. Spot ethylene prices on CFR Northeast Asia basis gained US$75/ton since the beginning of August, and gained a modest US$40/ton hike in Southeast Asia on CFR basis. News that Formosa had to shut its cracker and refinery due to a fire at its complex in late July initiated the rising trend. Ethylene markets managed to retain strength last week despite a more than 6 dollar fall in crude oil prices and a US$40/ton drop in naphtha prices. September shipment offers rose to US$965/MT CFR Far East.
Propylene prices have firmed up a tad above US$1155/MT in Asia in the week of August 23, 2010. Spot propylene prices in Asia remained firm over the past week, with supply limitations pushing prices higher despite the ongoing decline in crude oil prices. Supply is said to be particularly tight in Northeast Asia where Formosa had to shut one its 2 RFCC units for unexpected maintenance. Sellers are diverting cargoes to the North East for better price realization, leading to supply constraints in the South East. Japan’s Tonen Chemical began a month long maintenance shutdown at its 300,000 tpa propylene capacity cracker last week, Tosoh experienced an unexpected shutdown at its 270,000 tpa propylene cracker at Yokkaichi that was resolved within a few days. Thailand’s Rayong Olefins has moved the date for a scheduled shutdown at its 600,000 tpa propylene cracker from 2011 to November 2010, while PTT is running its 310,000 tpa propylene capacity I4-1 cracker at about 70% after the restart date at the cracker had to be postponed from August 4 to August 13.
Amid robust upstream ethylene prices and buoyant PVC markets, EDC prices have risen to US$470/MT in Asia in the week of August 23, 2010. Selling intentions for September spiked past the 500 dollar mark.
As feedstock ethylene prices rise, and downstream PVC demand strengthens, VCM prices in Asia have ascended to US$780/MT in the week of August 23, 2010.
As demand from derivative sectors get increasingly buoyant, Styrene Monomer prices have soared past US$1100/MT in Asia in the week of August 23, 2010. FOB Korea September shipment deals were concluded at these levels. Feedstock benzene prices also rose by over 30 dollars to US$865/MT levels.
HDPE prices have dipped to US$1165/MT in Asia in the week of August 23, 2010 on unenthusiastic demand that weakened along with sinking crude oil values. As crude oil continues to weaken, buyers are deferring deals in anticipation of a fall in prices. For September, producers in Far East, NE Asia and SE Asia have offered film grade at US$1200/MT CFR China. Markets have been assessed at US$1125-1165/MT CFR China, as deals from the Middle East were heard concluded these levels. Weak crude oil is anticipated to dampen Asian and Middle Eastern producers’ efforts to raise September shipment prices.
LDPE prices have stagnated at US$1335/MT in Asia in the week of August 23, 2010 on limited deal conclusion. CFR China offers for September were heard at US$1370/MT levels, even as buying intentions were pegged at the 1300 dollar mark. It is expected to be relatively easier for Asian producers to raise prices for film grade as supply tightness persists due to planned and unscheduled plant shutdowns in Asia and the Middle East. Most Middle East and Asian PE producers are expected to announce their September offers to the market this week.
LLDPE prices have remained unchanged at US$1165/MT in Asia in the week of August 23, 2010. CFR China offers for September shipment have been pegged at US$1165-1200/MT, with deals concluded at levels unchanged from August transactions. The market awaits offers from producers in Asia and the Middle East. Higher offers are likely to meet with strong buyer resistance as most importers expect prices to fall in line with crude oil prices.
Polypropylene prices have not moved from last weeks’ US$1255/MT in Asia in the week of August 23, 2010. The markets have witnessed limited deal conclusion in anticipation of a price correction in line with falling crude values. CFR China offers from South Korea were heard at the 1300 dollar mark, and despite stray deals concluded just ten dollars lower for Taiwanese material, most buyers’ intentions remained unaltered from last week.
PVC prices have stepped up to US$955/MT in Asia in the week of August 23, 2010 on enthusiastic demand resulting in upbeat offers for next month. Most CFR China September shipment offers have been pegged at US$955-995/MT levels.
As buyers came into the markets, GPPS prices have spiked to US$1255/MT in Asia in the week of August 23, 2010. Demand from converters, as they build up inventories at the start of Christmas season, has been resulted in buoyant market outlook. CFR China prices of GPPS grade were at US$1255/MT and HIPS were about 100 dollars higher.
ABS prices rose to US$1950/MT in Asia in the week of August 23, 2010 amid mounting upstream costs. September shipment offers from sellers from South Korea and Taiwan were heard at US$1975/MT levels, with buying interest pegged about 425-30 dollars lower.