Crude oil prices fell below the US$70/barrel mark in the week of December 14, 2009 as the American dollar continued to strengthen and on concerns over high inventory levels and lacklustre demand. Monday morning saw crude oil futures dipped by over a dollar in Asia on fresh concerns of weak supply-demand fundamentals that are weighing heavily on prices. Light, sweet crude futures for delivery in January dipped to US$69.6 on the Nymex, while Brent crude on London's ICE Futures exchange inched up to US$72 a barrel. The International Energy Agency is uprevising its demand estimate for 2010 by 130,000 bpd to 86.3 million bpd, as demand increases from the booming Asian economies and the developed nations could start consuming more. This forecast of increasing demand is likely to boost oil prices next year that currently stand at US$71 a barrel in the long run.
Naphtha prices dipped to US$690/MT in Asia in the week of December 14, 2009, in line with weakening crude oil values, on concerns of an overheated market. Open spec naphtha for H2 Jan shipment fell to US$690/MT CFR Japan in anticipation of a supply glut from the West. As realization is healthier in the resurgent markets of Asia, over 400,000 tons of European naphtha has been provisionally booked to go to Asia this month. Naphtha markets face several bearish influences including flat demand at high levels, higher refinery run rates in Japan, a weak gasoline market, large exports from India and huge arbitrage cargoes.
Lackluster oil and naphtha prices along with deteriorating derivative markets have not been able to arrest a rise in ethylene prices. CFR China January shipment ethylene prices have spiked past US$1120/MT, but CFR SE Asia prices have touched the 1200 dollar mark as supply constraints continue in the region. Ethylene supply woes persist in the region as a shutdown continues at Iran’s 1.32 mln tpa cracker at Iran’s Jam Petrochemical.
Putting an end to the persistent uptrend, propylene prices have dipped in Asia in the week of December 14, 2009. From levels of US$960/MT FOB Korea in H1-October, H2-December propylene prices had spiked past US$1100/MT. Lackluster sentiments in downstream polypropylene markets has caused FOB Korea prices to move south, below US$1100/MT. As Asian sellers hiked offers by about 100 dollars for December shipment, the region witnessed an influx of import cargoes, easing supplies amid yo yoing upstream markets and waning derivative markets, propylene prices have slipped.
An uptrend persisted in EDC prices due to restricted avails in the region, pushing up CFR China prices to US$485/MT in Asia in the week of December 14, 2009. After successful conclusion of deals at these levels, offers have spiked to the US$500 mark as prices continue to rise amid improved downstream PVC prices and stringent supplies
Driven by the strength in feedstock EDC values and bullish PVC markets, VCM prices have moved up to US$750/MT amid restricted supplies. As offers from upstream EDC sellers move north, next month offers for VCM are expected to increase by about 25 dollars.
Styrene Monomer prices have dropped to US$1130/MT in Asia in the week of December 14, 2009, in line with falling input costs and weak interest from derivative markets. Offers have fallen as feedstock benzene prices hover around lowered levels of US$900/MT FOB Korea.
Price of all polyethylenes has softened in Asia this week on lackluster trading. Market movement has been slow on preparation of accounts during end of year; and on hand-to-mouth buying in many countries. Singapore, Indonesia, Malaysia, the Philippines, Thailand and Brunei, under a free trade pact, get ready to remove import duty for a range of products, including polyolefins, starting 2010. Material movement will increase as trade between the ASEAN-6 nations will become duty-free along with abolition of custom duties for LLDPE trade with China. Uncertainty over demand ahead of the Lunar New Year holiday in China in mid-February, has led to hesitation from buyers in China. Prices are expected to continue easing as supplies in the region have been augmented with start up of Thailand's PTT Chemical’s 400,000 tpa LLDPE plant and Panjin Petrochemical’s 300,000 tpa LLDPE/HDPE swing plant along with Sinopec Tianjin’s 300,000 tpa HDPE and LLDPE plant in China. Supplies will increase when PTT Chemicals’ new HDPE plant as well a 300,000 tpa LDPE plant start up by Q2-2010. Simultaneously, capacities will come onstream in delayed projects in the Middle East
As demand from China waned on rising inventory levels; and a downtrend in crude prices continued, HDPE prices dipped to US$1265/MT in Asia in the week of December 17, 2009. Markets sentiments were lackluster due to reluctance on part of buyers in China as they anticipate another price reduction next month. Being well stocked, they are in no urgent need to buy at the current prices they deem at a higher level. Very few seller’s offers were heard in the subdued markets for next month.
In line with falling domestic prices in China, LDPE prices fell to US$1390/MT in Asia in the week of December 14, 2009 amid unenthusiastic buying. The markets await deal conclusion in the absence of offers from sellers as well as low key buying interest, as most Chinese players prefer to wait and watch.
LLDPE prices have declined to US$1300/MT in Asia in the week of December 14, 2009 in line with lowered values in Chinese markets triggered by restrained demand from processors. Falling upstream crude values combined with uncertainty over demand ahead of the lunar New Year break in China in mid-February, has led to reluctance among buyers in China, leading to a price dip for the first time after many weeks of price increases.
In the week of December 14, 2009, at US$1185, polypropylene prices continue to be stable for over two weeks on limited deal conclusion for next month shipment. As feedstock propylene prices continue to deteriorate, buyers are reluctant to buy in anticipation of yet another PP price correction. The market awaits offers for January shipment amid muted buying interest. After some CFR China deals for yarn/injection grades were settled at US$1190/MT levels, few deals were heard concluded an additional 10-15 dollars lower in line with bearish market sentiments.
POLY VINYL CHLORIDE
As feedstock ethylene, EDC and VCM costs escalated this week, January shipment offers were hiked. PVC prices spiked to US$945/MT in Asia in the week of December 14, 2009. CFR China offers from Taiwan and Thailand swelled to US$940/MT while those from Japan were heard ten dollars higher.
Despite declining input costs, GPPS prices escalated to US$1245/MT in Asia in the week of December 14, 2009. Producers have hiked offers in a bid to recover the higher cost of production due to the recent high gains in feedstock values. Even at current depressed SM values, GPPS makers need to hike prices by an additional 45-50 dollars to recover costs. This could lead to yet another increase in polystyrene values. CFR China offers were heard at US$1275/MT, with deals concluded about 25 dollars lower. A spike in butadiene values has propped up HIPS offers to US$1360/MT levels with deals concluded about ten dollars lower.
ABS prices have moved up to US$1545/MT in Asia in the week of December 14, 2009 as feedstock butadiene prices escalated, and feedstock SM continues at a high level. After successful conclusion of CFR China deals by sellers from South Korea and China below US$1550/MT mark, offers were hiked by an additional 20-30 dollars.