Price trends of oil, polymer feedstock and commodity polymers in Asia for the week ended February 21, 2011

CRUDE OIL New York's main contract, light sweet crude for delivery in March rose by over a dollar to US$87.3 in the week of February 21, 2011, while Brent crude crossed US$103 on concerns fuelled by rising tensions in Libya. Violence in OPEC member state Libya is igniting fears of instability spreading throughout the key oil-supplying Middle Eastern and North African region. Midweek oil prices hovered around US$85 on investor concerns that political upheaval in the Middle East could spread and disrupt crude supplies. An unexpected fall was seen this week in US crude oil stockpiles suggesting improvement in demand. The American Petroleum Institute reported that crude inventories fell 354,000 barrels last week, inventories of gasoline rose 1.2 mln barrels and distillates dropped 1.2 mln barrels. NAPHTHA Naphtha prices rose to hover around US$890/MT in Asia in the week of February 21, 2011 boosted by strong crude prices. However, weighed down by weak demand, cracks remain depressed, nearing a five-month low on weak fundamentals. ADNOC and KPC are in a deadlock with buyers expecting lower premiums for term naphtha. Buyers are said to be looking at about US$15/ton premiums, in view of the weak outlook, with a heavy cracker turnaround season. Asia’s naphtha market is currently in favour of buyers, as spot demand is expected to fall due to upcoming cracker maintenance and abundant Western barrels sail into Asia in March. Honam is shutting a 750,000 tpa cracker in Yeosu from April 1-10 for maintenance, reducing its demand by about 66,000 tons during the shutdown period, while LG Chem is shutting its 800,000 tpa cracker in Daesan from end-March for a 45-day turnaround. This will wipe out about 315,000 tons of naphtha demand during the shutdown period. Open spec H1 April naphtha is at US$890/MT. ETHYLENE Ethylene prices have spiked past US$1230/MT in Asia in the week of February 21, 2011. Prices are firming up ahead of the approaching cracker maintenance season in the region. PROPYLENE Amid tight avails, and firming downstream sentiments, propylene prices have spiked to US$1370/MT in Asia in the week of February 21, 2011. POLYMERS HDPE HDPE prices rose to US$1350/MT in Asia in the week of February 21, 2011 in line with rising upstream costs. CFR China offers for March heard at US$1415/MT from Taiwan await deal conclusion. Import cargoes are no longer available at previous transaction levels in China, where domestic prices rose by CNY 100/ton in the week. Traders are unwilling to book fresh import cargoes due to a wide gap of US$30-40/MT between domestic retail and import prices. Despite tepid buying, sellers are in no rush to lower offers despite being well stocked, as they anticipate a prices hike. Imports are expected to be higher priced in line with higher feedstock values and in view of the tightening of PE supply from the Middle East along with planned maintenance shutdowns in Asia in Q2-10. LDPE LDPE prices stabilised at US$1720/MT in Asia in the week of February 21, 2010. March shipment offers that have been increased have met with no buying interest, as China awaits its converters to run factories at normal rates post Lunar New Year Holidays. Sellers in China are well stock piled as they await domestic converters to restart at normal rates post-Lunar New Year holidays. They prefer to defer stock clearing anticipating better price realisation, in view of the higher priced imports. LLDPE LLDPE prices rose to US$1430/MT in Asia in the week of February 21, 2011. After successful conclusion of deals at US$1420-1440/MT, CFR China offers for March shipment were heard at US$1535/MT from Thailand. LLDPE film prices in China’s import market are beginning to lose premium over HDPE film prices as per Chemorbis. PE demand has not been up to sellers’ expectations so far this year, especially since the end of the Chinese New Year holidays. Although LLDPE sellers are not alone in complaining of weaker demand following the holidays in China, HDPE sellers have been able to push through larger increases given the extremely thin spread between spot ethylene prices and import HDPE film prices. Since the start of 2011, import HDPE film prices on a CFR China basis have risen by US$10-25/ton while LLDPE film prices have gained only US$10/ton on the lower end of the range and LDPE film prices have firmed up by US$20/ton on both ends of the range. POLYPROPYLENE Polypropylene prices have firmed at US$1540/MT in Asia in the week of February 21, 2011, despite rising propylene values and a bullish market outlook in anticipation of a cutback in supplies in Q2 due to planned maintenance in Asia and the Middle East. Lower than expected trade volumes post Lunar New Year Holidays has led to elevated stock levels, contributing to firm buying resistance. However, market outlook is positive if processors in China return to normal run rates. Formosa Chemicals and Fibers Corp plans to reduce production by 40% at its 450,000 tpa PP facility at Mailiao, Samsung Total is to shut two plants at Daesan, taking off 840,000 tpa capacity for four weeks in early May, Honam plans to shut its 380,000 tpa plant at Yeosu in early April for about two weeks, Polymirae plans to shut three plants in Yeosu in April for maintenance taking of 470,000 tpa capacity. POLYVINYL CHLORIDE The PVC market is on an upward rally in Southeast Asia as well in line with China. The region saw March increases of US$30-40/ton from producers and traders this week, with some producers even announcing monthly price hikes of as much as US$70/ton compared to the pre-holiday levels. Demand is expected to be better next month with sellers feeling confident that buyers will be looking for cargoes to replenish their stocks for the upcoming high season. PVC markets are indicating another bullish month, with March offers being revealed higher to China and Southeast Asia this week, as per Chemorbis. Higher March offers to Asia are in line with the pre-holiday expectations given limited supplies with producers, firm costs and anticipation of an improvement in demand with the start of the high season for many PVC applications. While more producers are expected to approach the Asian market with similar import prices, buying interest remains restricted for now as many converters in China are still away from their desks due to prolonged holidays. In China, after PVC sellers wrapped up February business with increases of US$30-40/ton from the previous month, Asian producers re-emerged with further increases of US$60-80/ton on their March import offers as of this week. Import offers from the US to China also rose by US$70-80/ton from the February done deal levels following last month’s US$30/ton increases. Suppliers pointed to the ongoing firmness in other global PVC markets, higher costs, along with the limited availability in China as a result of transportation difficulties and the problems with VCM supplies as the main reasons behind their hike decisions. Rising domestic prices as well as the awaited revival in demand were amongst the other factors causing March price hikes.
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