Price trends of oil, polymer feedstock and commodity polymers in Asia for the week ended January 18, 2010

19-Jan-10
CRUDE OIL As the dollar weakened, crude oil for February delivery rose to US$78.6 in electronic trading on the Nymex, rising for the first time in six days after falling by 5.7% in the week of January 18, 2010. This week’s dip is the first weekly decline in five weeks. The dollar fell versus 12 of its 16 major counterparts before this week’s report in USA showing a rise in building permits at a slower pace and a fall in manufacturing in the Philadelphia region. Temperatures in the U.S. northeast, which consumes almost 80% of the country’s heating oil, is predicted to be above average through Jan. 28. NAPHTHA Despite optimistic C2, C3 market outlook, naphtha prices have fallen in the week of January 18, 2010 in line with falling oil prices. Prices for H2-February delivery dipped by over ten dollars to US$755/MT CFR China levels. H1-March open-spec naphtha stood at US$750/ton CFR Japan, rising by almost ten dollars from the earlier session, defying crude losses amid robust petrochemicals demand. Naphtha crack spread closed at US$174.63/ton, barely short of the 20-month high of US$176.25 on 22 December. Asia is likely to see reduced naphtha imports from Europe, as freight costs increase and premiums get stronger, restricting fresh bookings. Though 1.2-1.3 mln tons of naphtha is estimated to land in Asia during January and February, volumes for March arrivals are lacking. European crackers are using more naphtha as chilly temperatures have led to a greater usage of liquefied petroleum gas (LPG). Europe is also facing reduced inventory levels on lower supplies partly due to refinery maintenance, coupled with costlier bookings of long-ranged vessels. Additionally, refinery maintenance in the Middle East has also hampered naphtha flows to Asia, where petrochemicals demand remained bullish with most Northeast Asian crackers operating at full tilt to take advantage of the robust margins. Naphtha is expected to see a seasonal demand lull after the Lunar New Year, especially with many ethylene producers embarking on regular maintenance in March. ETHYLENE Ethylene prices have spiked by almost US$120 in the week of January 18, 2010 in Asia. Prices have moved north for February to US$1325/MT FOB Korea amid restricted avails on limited availability in Asia and in the Middle East, coupled with healthy buying interest from Asia’s PE producers. Demand from downstream PVC and PE markets remains robust despite price hikes. Prices have moved up to US$1400/MT CFR SEA and at around US$1350/MT CFR NE Asia. PROPYLENE Propylene prices have mounted to US$1215/MT FOB Korea in the week of January 18, 2010. Prices have found support from robust naphtha prices amid supply constraints coupled with rising downstream demand. Supply concerns have resulted from problems in the upstream chain. EDC EDC prices in Asia have fallen to US$445/MT in the week of January 18, 2010, contrary to robust ethylene markets and healthy demand and outlook from downstream VCM and PVC markets. The reason for this dip in prices was an influx of cargoes from the Middle East and expected large volumes of US cargoes in the region VCM Rising prices of derivative PVC coupled with restricted avails in the region, has pushed up VCM prices to US$825/MT in Asia in the week of January 18, 2010. After conclusion of CFR deals at US$835/MT, next month offers have been increased by 10-15 dollars in line with persistently rising ethylene prices. STYRENE MONOMER Styrene Monomer prices have eased to US$1275/MT in Asia in the week of January 18, 2010, in line with falling oil and benzene prices. February shipment prices have softened on lackluster buying interest. Buyers are refraining from deal conclusion in anticipation of further price correction in line with a sharp drop of crude oil and benzene prices as few deals were heard concluded at US$1260-1270/MT levels. Feedstock benzene prices have dipped in Asia in line with falling crude oil prices. March shipment prices have fallen to US$1025/MT levels, and very few deals were heard concluded as buyers prefer to wait in the sidelines POLYMERS China’s central bank; the People’s Bank of China (PBoC) has taken clear measures to curb aggressive lending. PBoC announced plans to raise its reserve requirement (a portion of deposit that banks must park with the central bank) by 50 basis points to 16% on 18 January and has raised interest rates for its one-year bills by eight basis points to 1.8434% as per ICIS. These followed an unexpected increase in PBoC’s three-month bills late last week, which may have signalled an end to China’s expansionary monetary policy. China’s surprise monetary tightening could impact the buoyant mood in regional petrochem trading on concerns that it would translate to weaker demand. However, the actual negative impact would likely be concentrated on speculative trades, where excess money could be flowing. The rally in Asia’s PE markets has started to fizzle out after robust buying pushed up prices since the beginning of the year. This can be attributed to the decision by the Chinese Central Bank to raise reserve requirements along with softening crude oil and naphtha feedstock costs, dampened buying interest in China, with some buyers expressing hopes that prices would retreat from their early week highs to more workable levels, as per Chemorbis. 2010 began on a strong note for Asian PE, with prices across the region surging on the strength of limited supplies, higher upstream costs and a wave of speculative buying in China. This seems to have come to a halt. The approaching Chinese New Year holidays is expected to exert downward pressure on the market as buyers will become increasingly wary of purchasing while sellers will look to sell off their excess inventories ahead of year-end bookkeeping. Although these factors would seem to indicate a strong likelihood of softer prices, sellers have found support from surging ethylene feedstock costs, which have shot up by almost US$150/ton since the start of the year. HDPE HDPE prices stagnated at US$1345/MT in Asia in the week of January 18, 2010. Sellers, who have found support from surging ethylene feedstock costs, plan a price hike. CFR China film grade material for February was being offered from most Asian players and from sellers in Malaysia at US$1380-1395/MT, and above US$1400/MT from Taiwan. CFR China deals were concluded from South Korea at US$1385/MT levels and at US$1325/MT from USA. LDPE Restricted avails in the region have pushed up LDPE prices in Asia to US$1595/MT levels in the week of January 18, 2010. After successful deal conclusion at US$1590/MT levels, CFR China offers from Malaysia were heard above US$1600/MT, while those from South Korea and Middle East were heard an additional 50 dollars higher. LLDPE LLDPE prices stabilized at US$1445/MT in Asia in the week of January 18, 2010 for February despite rising costs of ethylene. Domestic producers have lowered their PE prices in China, especially in the LLDPE c4 film market at the beginning of the week. Reduction of about 30-40 dollars in domestic prices can be attributed to the softening market sentiment along with lower energy and LLDPE futures prices. Few CFR China deals for February shipment from South Korea were concluded at US$1460/MT levels, and about 40-50 dollars lower from USA. Interestingly, the weakening in the LLDPE c4 film market has also started to spill over to HDPE film. POLYPROPYLENE Polypropylene markets of Asia, that saw robust price hikes in the beginning of the week of January 18, 2010, have seen a downward price revision. PP prices for the week were heard at US$1320/MT as the market lost steam on severe price resistance from buyers in China, where domestic prices have seen a dip. CFR China offers for February for yarn grade/injection grade were heard from Taiwan at US$1365/MT, and about 10 dollars lower from Malaysia; after deal conclusion for yarn grade from South Korea at US$1315-1320/MT. In Europe, PP buyers are yielding to price increases in January, but prefer to buy on a hand-to-mouth basis before the February propylene settlement. POLYVINYL CHLORIDE Robust market demand and outlook have propped up PVC prices to US$1005/MT in Asia in the week of January 18, 2010, amid healthy feedstock prices. CFR China February shipment offers from Taiwan have been heard at US$1015/MT, about ten dollars higher from Thailand and at US$1025/MT from Japan in line with rising feedstock costs and robust demand from China. Chinese producers announced additional price hikes of US$20-30/ton on their export offers due to firming sentiment in the region’s import markets to US$950-985/MT FOB. Though January is conventionally a slow month for PVC demand in the Northern Hemisphere, prices in Asia have seen significant increases this month with general sentiment that prices will continue to firm up. Prices have found support from robust demand as converters build stocks ahead of the Chinese Lunar holidays in mid-February, along with rising costs of feedstock ethylene and VCM that have kept PVC producers under pressure to work for higher prices to cover operating costs. POLYSTYRENE Polystyrene prices have risen to US$1450/MT despite falling SM and benzene values in Asia in the week of January 18, 2010, on raised offers. Prices have found support from robust demand as converters build stocks ahead of the Chinese Lunar holidays in mid-February. For most CFR China offers for February for GPPS above US$1450/MT, deals were concluded about ten dollars lower. Offers for HIPS were heard at US$1540/MT CFR China with deals concluded about 30 dollars lower. ABS ABS prices have increased to US$1745/MT in Asia in the week of January 18, 2010 in line with rising feedstock costs. Feedstock acrylonitrile (ACN) prices in Asia are poised to rise to US$2000/ton in February triggered by a supply crunch, strong demand from China and rising feedstock propylene costs. February shipment CFR China prices were offers were heard at US$1780-1820/MT from Taiwan and South Korea. Deals were heard concluded at US$1745/MT CFR China. ABS prices are expected to rise further as feedstock ACN supply is expected to be constrained by a flurry of plant turnarounds in Asia and outages in Europe. Several ACN plants in Asia, including Japan’s Asahi Kasei, South Korea’s Taekwang Industrial and Taiwan’s China Petrochemical Development Corporation (CPDC) have limited spot availability due to a heavy turnaround schedule in the first four months of 2010.
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