Price trends of oil, polymer feedstock and commodity polymers in Asia for the week ended July 12, 2010

13-Jul-10
CRUDE OIL Crude oil prices have risen to US$76 on the Nymex in the week of July 12, 2010. Optimism in stock markets and expectations of robust corporate earnings in USA have sustained market sentiments, and propped oil prices above US$76 a barrel in Asian trade. China's rising crude oil imports, drop in crude inventories, and the International Monetary Fund's forecast for stronger global growth were also supporting oil prices. Last weeks’ rise was also supported by speculation of a fall in crude supplies in line with a rise in consumption of distillate fuel, including heating oil and diesel. NAPHTHA In line with improving crude oil values, naphtha prices have moved north in Asia in the week of July 12, 2010. Open-spec prices for H1-July delivery settled just below US$630/MT CFR Japan. Naphtha cracks - the premiums/losses from refining Brent crude into naphtha, have dropped to levels of US$76/ton. Cracks have ebbed to their lowest since Oct. 16, 2009 on concerns over demand after news was released of a fire that forced a shutdown at Taiwan's Formosa Petrochemical Corp’s 700,000 tpa naphtha cracker. A month-long shutdown of the cracker equates to a naphtha demand loss of around 175,000 tons. This outage coincides with already depressed naphtha demand triggered by weak petrochemical margins at a time when the market was seeing signs of recovery in the last two sessions. ETHYLENE Ethylene prices have recoiled in Asia to US$870/MT in the week of July 12, 2010 after news was released of a fire that forced a shutdown at Taiwan's Formosa Petrochemical Corp’s 700,000 tpa naphtha cracker. Formosa’s outage could result in reduced supplies in the market, hence some Asian ethylene traders have deferred spot discussions as they await greater clarity regarding the situation. Interestingly, Formosa has not announced any reduction in its ethylene and propylene exports, and is assessed to have sufficient inventories to ensure that derivative plants would continue running, provided the shutdown is not prolonged. Prior to the outage, ethylene bid-offer discussions were heard at US$860-900/MT CFR NE Asia. Buying interests remain pegged at around US$850/MT CFR levels as downstream PE markets were still seen bearish in Asia. PROPYLENE Propylene prices have bounced back to US$1035/MT in Asia in the week of July 12, 2010. A sudden shutdown at Formosa’s cracker could result in reduced supplies in the market, hence propylene sellers have stopped offering material as they wait to assess the situation. Prices in Asia rose by 20 dollars, after talks and deals were reported in the low to mid US$1000s/MT CFR NE Asia. EDC EDC prices have softened to US$435/MT in Asia in the week of July 12, 2010 amid subdued demand from derivative markets. Offers were heard at US$440/MT, while buying intentions were pegged about 15-20 dollars lower. VCM Lackluster demand from downstream PVC sector has pulled down VCM prices to US$745/MT in Asia in the week of July 12, 2010. August shipment offers continue to hover below US$750/MT. STYRENE MONOMER Styrene Monomer prices have dipped to US$970/MT in Asia in the week of July 12, 2010 on slothful downstream demand. Newer styrene capacities in China are exerting a continuous downward pressure on styrene prices. This has led to an expectation of further declines in the days to come. Feedstock benzene prices steadied at last week’s US$780/MT in Asia amid stronger crude oil market. Despite depressed demand for PS, styrene production figures have escalated to new heights in Asia due to the start-up of some new capacities in China as well as the resumption of production at some existing plants in Asia. China’s Sinopec Zhenhai has reportedly reached full rates at its new 620,000 tpa styrene plant while CNOOC and Shell’s styrene plant, which recently had its capacity increased by 200,000 tpa to 760,000 tpa, is also reported to have reached full run rates after returning from their debottlenecking operation. Mitsubishi has resumed operations at a 370,000 tpa styrene plant in Japan and South Korea’s LG Chem restarted a 180,000 tpa styrene following a maintenance shutdown in June. In addition, Iran’s Pars Petrochemical has reportedly resumed shipments to Asia from its 600,000 tpa styrene plant. The plant, which was originally started in March of this year, had been operating at reduced rates for the past few months. POLYMERS HDPE Most key suppliers have reduced offers, pulling down prices in Asia to US$1065/MT in the week of July 12, 2010. August shipment film grade cargoes have been offered by Iran's Marun Petrochemical’s from its 300,000 tpa HDPE plant in Mahshahr, after the plant has restarted post-turnaround. Marun had brought forward a turnaround at the plant to early June to help ease the supply glut witnessed in markets due to weak market sentiment in China. Worries of a slowing economy have kept HDPE inventories high and demand depressed in China. Now, with the resumption of exports from Iran, other buyers are expected to be negatively impacted in the lackluster markets. Due to US trade sanctions, Iranian products do not trade freely on the international market and often carry a discount over parcels of other origins. The current discounted levels are expected to exert significant pressure on PE prices as Chinese buyers often pick the best-cost option. Sinopec's offers on HDPE grades have also dropped month on month- film grade was down 4.2%, yarn dipped 3.8%, blow molding fell 3.2%. These reductions in PE prices in the domestic markets of China are expected to negatively impact PE prices in Asia. This is because conventionally, Sinopec prices have a significant impact on the CFR Far East Asia benchmarks, as overseas producers and Chinese distributors take pricing cues from Sinopec's ex-works fixed prices. SE and FE Asian producers lowered their CFR China offers to levels below US$1100/MT for August shipment film grade. Deals were concluded about 25-30 dollars lower and at US$1000-1025/MT from the Middle East. LDPE LDPE prices have dropped to US$1280/MT in Asia in the week of July 12, 2010, on lackluster demand in the region, particularly China. Worries of a slowing economy have kept LDPE inventories high and demand depressed in China. Sinopec's offers for LDPE have dropped by over 5% month on month. These reductions are expected to negatively impact prices in Asia because conventionally, Sinopec prices have a significant impact on the CFR Far East Asia benchmarks. Overseas producers and Chinese distributors take pricing cues from Sinopec's ex-works fixed prices. CFR China offers have been heard in the region hovering below the 1300 dollar mark, with deals concluded for cargoes from South East Asia about 25 dollars lower. LLDPE LLDPE prices have plunged to US$1105/MT in Asia in the week of July 12, 2010 amid lackluster demand from China. To cope with high inventories in the domestic market and low demand, Sinopec has reduced offers by 11.8% on the month. With the coming onstream of Sinopec Zhenhai Refining & Chemical Company's 400,000 tpa LLDPE plant, the markets in China are faced with a supply glut amid weaker demand. Also, LLDPE typically experiences low seasonal demand between July and August. These reductions in PE prices in the domestic markets of China are expected to negatively impact PE prices in Asia. CFR China offers dropped below the 1100 dollar mark. POLYPROPYLENE Polypropylene prices in Asia have fallen to US$1165/MT in the week of July 12, 2010 amid soft demand. Despite successful conclusion of deals at the 1200 dollar mark for yarn grade from Taiwan and South Korea, offers have dropped. Newer offers from Middle East and India for August shipment were heard about 25 dollars lower, with deals closed about ten dollars lower at US$1165-1170/MT. The already weak markets are expected to see an additional supply as production resumes at ExxonMobil’s 405,000 tpa PP plant. POLYVINYL CHLORIDE PVC prices have weakened to US$875/MT in Asia in the week of July 12, 2010 amid pessimistic market sentiments and outlook coupled by a weakness in domestic prices in China. CFR China offers have been heard at US$900-915/MT levels, with bids pegged about 50-60 dollars lower. POLYSTYRENE Polystyrene prices have fallen to US$1130/MT in Asia in the week of July 12, 2010 as markets remain gloomy under pressure from the recently plummeting prices of feedstock SM and lackluster demand. CFR China offers have fallen to US$1170/MT levels, with buying bids pegged about 40-45 dollars lower. CFR China HIPS prices also fell to US$1225/MT levels. Demand for end products is not expected to pick up in the short term at a time when the newer styrene capacities in China are exerting a continuous downward pressure on styrene prices. Producers offering to the Chinese market reported price cut of US$15-50/ton owing to poor demand, as most of them reduce operating rates to around 50% after several consecutive weeks of poor sales. Local PS prices in China posted declines of over 20 dollars on the week, with producers inside China also reporting a reduction in operating rates to 50-80% of capacity in an effort to cope with the persistent lack of buying interest. Similar price declines were recorded in Southeast Asia, with import GPPS offers falling US$20-40/ton on the week. Most buyers predict that the current lackluster demand conditions will last through July and August. Several traders and distributors mull suspension of their PS business owing due to unsatisfactory margins. ABS ABS prices continue to fall to US$1775/MT in Asia in the week of July 12, 2010, with a persistent drop in cost of feedstock styrene, butadiene, ACN. Offers have been slashed to levels US$1800-1840/MT by key suppliers, with buying intentions pegged almost 50-100 dollars lower.
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