Price trends of oil, polymer feedstock and commodity polymers in Asia for the week ended February 22, 2010

23-Feb-10
CRUDE OIL Crude oil prices in Asia rose past US$80 for the first time in more than a month, in the week of February 22, 2010. Oil prices have benefited from positive economic data and from a tightening global market balance. Traders are upbeat about the prospects for oil demand from USA and China- the world's two biggest energy consumers. Sale of highway diesel, a good indicator for US economic activity, has begun to recover. Also, a recent rebound in US shares has also boosted sentiment toward crude along with reports that China increased the volume of oil it processed in January by 29% year-on-year in January to 30.14 mln metric tons. NAPHTHA In line with stronger crude oil values, H2-March open-spec naphtha gained to rise to US$700/MT CFR Japan in the week of February 22, 2010. During the week, naphtha prices in Asia fell along with naphtha cracks that dipped for the fifth consecutive session to their lowest in about one-and-a-half week. Weaker demand from Northeast Asia and an unusual offer from Kuwait were the responsible factors. Kuwait Petroleum Corp (KPC), which has not been actively offering full-range naphtha on a spot basis after its new aromatics plant was commissioned late last year, is looking to sell 50,000 tons of the petrochemical feedstock for mid-February lifting. The offer was made after it shut its aromatics plant for a four-day repair from Feb. 9-12. Spot purchases for March cargoes from South Korea, Japan and Taiwan barely touched 800,000 tons versus more than 1.1 mln tons bought for February arrival. Demand will dip further as Taiwan's Formosa Petrochemical will not buy spot naphtha for March arrival. The Taiwanese major had deferred receiving 150,000 tons of spot naphtha to March from February due to sufficient stocks as it pruned run rates at its 2.93 mln tpa cracking complex to 100% from 103%. ETHYLENE & PROPYLENE The first days of post-holiday trading are lackluster in Asia. Demand in Asia, that faded ahead of the Lunar New Year holidays, remains lackluster as the market awaits return of most buyers post-holidays. The month of March will kick off an unusually heavy season of cracker maintenance in Asia, expected to keep ethylene and propylene supplies tight in the region. At the same time, some previously started newer capacities have picked up pace amid new start ups. Sinopec Zhenhai plans to start commercial operations at its new 1 mln tpa cracker complex in March, supporting a new 450,000 tpa LLDPE plant and a 300,000 tpa PP plant. Panjin Petrochemical actually started up its new 450,000 tpa steam cracker in December, operations have been unstable leading to a delay in starting up the polymer units. It’s new 300,000 tpa HDPE/LLDPE swing plant is expected to start up once the cracker has stable operations. The 1 mln tpa complex of Sinopec Tianjin is to restart, and will support a new 300,000 tpa HDPE plant, a 300,000 tpa LLDPE plant and a 450,000 tpa PP plant. Liaoning Huajin Tongda Chemicals Co which started at new 450,000 tpa cracker and Datang Inner Mongolia will start commercial operations at its 460,000 tpa plant by March. Shell’s 800,000 tpa cracker in Singapore is scheduled to be running by the end of February. PTT Chemical Public Co (PTTCH) started up its new 1 mln tpa cracker and reached on-spec production in early February with commercial ops starting this month. After the cracker start up, PTT Polyethylene Company (PTTPE) will restart its new 400,000 tpa LLDPE in the last week of February, along with a 300,000 tpa LDPE plant scheduled to start in March. Siam Cement Group’s (SCG)’s new 900,000 tpa cracker will be starting up in March. Haldia Petrochemicals has reached on-spec production at its newly expanded complex in mid-February. Ethylene capacity was expanded by 150,000 tpa, propylene by 60,000 tpa, PE by 120,000 tpa (includes a 335,000 tpa HDPE and 335,000 tpa HDPE/LLDPE swing plant), PP by 75,000 tpa. In the Middle East, Sharq’s new 1.3 mln tpa cracker with 400,000 tpa HDPE and 400,000 tpa LLDPE plants plans to return to normal production levels by March. Yanbu National Petrochemical (YANSAB) plans to start up its new 500,000 tpa HDPE plant along with PetroRabigh complex that is supported by a 1.3 mln tpa cracker that was started previously. Full rates will be reached in February along with a 350,000 tpa LLDPE plant, a 250,000 tpa easy processing PE plant, and a 300,000 tpa HDPE plant. PP & PE Polyolefin inventories in China are high with an increasing risk that tighter lending conditions will impact consumption after the Chinese Lunar New Year holiday. Though the summer months happens to be China’s peak manufacturing season, concern over tightening credit is on the rise. The direction of spot PP and PE prices in Asia remains unclear in the first days of post-holiday trading. Polymer demand that faded ahead of the Lunar New Year holidays, remains lackluster as the market awaits return of most buyers post-holidays. Despite expectations by the sellers to see converters return to the market to re-stock cargoes shortly, traders are moving in to speed up sales. Several traders are offering previously bought stocks at prices well below the producer price level even as buyers remain hesitant about stocking up for the present despite low inventory levels, as per Chemorbis. The import market has been particularly quiet as traders and producers are reluctant to announce official offers in view of the current uncertainty in the market. In Southeast Asia, a Thai producer who had been offering at the upper end of the import range for homo-PP and HDPE film, reduced prices on Monday to move back in line with the general market level. Offers were cut for PP raffia by US$20/ton and by US$20-50/ton for HDPE film owing to the lack of buying interest and price enquiries. Though domestic markets have seen more activity, no clear direction has yet emerged. In China, producers reported lifting their local offers for both PP and PE by around CNY50-200/ton (US$7-29/ton), citing higher crude oil prices and their expectations of firming demand as support for their price increases amid rising LLDPE futures prices. Currently, buying interest remains muted.
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