Price trends of oil, polymer feedstock and commodity polymers in Asia for the week ended June 21, 2010

23-Jun-10
CRUDE OIL Crude oil prices have risen to levels past US$77 in the week of June 21, 2010. Towards the end of the week, prices for July rose to its highest intraday price in 6 weeks to US$78.6 on the Nymex, as markets got more confident of global economic recovery after China indicated an end to the yuan’s fixed rate to the dollar. China has effectively pegged the yuan at about 6.8 to the dollar since mid-2008 to prop up exporters during the global financial crisis. Buying power of the Chinese consumer will likely increase as a result of the appreciating yuan, leading to increased exports to China. Asian stock markets also moved up a few notches. NAPHTHA In line with rising oil prices, naphtha prices have seen a robust uptrend to US$695/MT in Asia in the week of June 21, 2010. Open-spec prices for H2-July delivery spiked to US$695/MT CFR Japan. A 40% drop in Europe’s naphtha exports to Asia in being anticipated as refiners lift supply; and prices in Singapore discourage shipments from Europe. Total exports for June may reach 300,000 tons vs an estimated 500,000 tons in May. Refiners in Korea and Japan are resuming operations after maintenance shutdowns, bringing back an estimated 700,000 bpd of processing capacity in July, leading to lower shortage next month. Japan’s Cosmo Oil Co. plans to start a unit at its 220,000 bpd Chiba unit, JX Holdings Inc will resume production from a condensate splitter at its 205,200 bpd Mizushima plant, the 270,000 bpd Kashima plant, the 160,000 bpd Oita plant and the 145,000 bpd Sendai plant. Nansei Sekiyu K.K. is to start its 100,000 bpd Nishihara refinery and Toa Oil Co Ltd. is to resume production at its 185,000 bpd Keihin while TonenGeneral Sekiyu K.K. plans to start units at its 335,000 bpd Kawasaki plant. ETHYLENE FOB Korea ethylene prices have collapsed to US$900/MT levels in Asia in the week of June 21, 2010, on an upsurge in supplies and lackluster demand from pessimistic PE markets. PROPYLENE Propylene prices have steadied at US$1070/MT in Asia in the week of June 21, 2010 as supply begins to trim on planned propylene shutdowns in the region. The propylene plants scheduled for shutdown in June, July are Nippon Oil’s three plants in Japan, Mitsubishi’s three plants in Japan, S.Oil and SK Energy’s plant in South Korea. EDC Diminishing PVC demand and weakening downstream markets amid collapsing ethylene values, have softened EDC prices in Asia to US$470/MT in the week of June 21, 2010. VCM VCM prices have weakened to US$775/MT in Asia in the week of June 21, 2010. Lackluster demand and pessimistic market outlook from downstream PVC amid falling ethylene values have influenced a fall in VCM prices. STYRENE MONOMER Styrene Monomer prices have collapsed to US$1015/MT levels in Asia in the week of June 21, 2010. This fall has been triggered by lackluster demand from downstream sectors and falling benzene values. July shipment benzene prices have dipped in Asia to US$800/MT levels despite a rise of US$4 per barrel in oil prices since beginning of the month. Styrene has lost almost US$70/ton FOB Korea since the beginning of June. This downward momentum was attributed to a spurt in supply in China’s domestic spot market where Sinopec Zhenhai started up a 620,000 tpa styrene plant at 90% capacity. CNOOC Shell is operating its newly expanded 700,000 tpa styrene plant in Nanhai at full capacity while Tianjin Dagu raised run rates at their new 500,000 tpa styrene plant in China to 80-85% capacity. Meanwhile, Iran's Pars Petrochemical restarted its 600,000 tpa styrene plant and is currently operating it at 70% capacity, doubling its styrene shipments to China this month. Amid high stock levels on the producers’ side, new styrene capacities in China and Iran as well as the current stock pressure on sellers are expected to take their toll on the PS market for the upcoming days. POLYMERS Sellers offering throughout Southeast Asia continue to face stiff pressure from relatively lower priced imports, resulting in falling prices or expectations of price declines in most of the region’s local polymer markets. With the implementation of policies designed to lower trade barriers, local sellers in SE Asia are finding themselves less insulated from overseas competition amid rising oversupply from Asia and the Middle East. A new worry looming large in China is the reduced competitiveness of its petrochemical producers in global markets on a recent move to enhance the yuan’s flexibility and further reform its currency regime. However, these reforms, thought to hurt export-dependent industries in the short run, will benefit the country in the long run, reduce risk of a dramatic escalation of trade tensions between China and the US, constrain inflation and asset bubbles in China, and facilitate transition of the Chinese economy from export-led to a consumption-driven one. HDPE HDPE prices have dipped to US$1120/MT in Asia in the week of June 21, 2010 on lack of deal conclusion, particularly in China. Sellers offering to their local markets also complained of facing difficulty in deal conclusion even after agreeing to significant price cuts. Malaysian producers implemented price cuts of US$40-60/MT for HDPE film, bringing the cumulative June declines in domestic PE offers to US$100-130/MT. In Indonesia, domestic offers witnessed week-on-week declines of US$20-85/ton for HDPE film, with distributors in the country complaining that they are still continue to face difficulty in attracting buyers despite these price reductions. Offers for locally-held imports in Vietnam have recorded cumulative declines of US$125-140/MT for film grade, with these decreases proving insufficient to lure converters back to the market. LDPE Amid fewer offers in a lackluster market, LDPE prices dipped to US$1330/MT in Asia in the week of June 21, 2010. CFR China offers at US$1350/MT levels, met with resistance from buyers with buying interest at lows of US$1300/MT. Sellers offering to their domestic markets in South East Asia also complained of difficulty in deal conclusion despite agreeing to significant price cuts. Malaysian producers implemented price cuts US$60/MT for LDPE film this week, bringing the cumulative June declines in domestic offers to US$140/MT. Offers for locally-held imports in Vietnam have recorded cumulative declines of US$125-160/MT for LDPE film since the last week of May, with these decreases proving insufficient to lure converters back to the market. LLDPE Awaiting offers from sellers, LLDPE prices have dipped to US$1165/MT on lackluster market sentiments in Asia, particularly China, in the week of June 21, 2010. Sellers offering to local markets continue to face difficulty in concluding deals even after agreeing to significant price cuts. In Indonesia, domestic offers decline week-on-week by US$60-90/ton for LLDPE film as distributors complain of difficulty in attracting buyers despite these price reductions. Offers for locally-held imports in Vietnam have recorded cumulative declines of US$140-155/ton for LLDPE film since the last week of May. In Taiwan, a supplier lowered offers to US$1185/MT levels. POLYPROPYLENE Amid lackluster demand in the region, polypropylene prices have fallen to US$1195/MT in Asia in the week of June 21, 2010. Domestic sellers in Malaysia and Vietnam conceded to further price reductions on their offers this week, while distributors elsewhere in the region predicted lower domestic prices over the near term. Malaysian producers implemented another reduction of US$60/MT on their offers for homo-PP this week, bringing their cumulative June decreases to US$100/MT from late May offer levels. Despite significant decreases, converters in the region continue to remain aloof from the market in anticipation of further price declines over the days to come. POLYVINYL CHLORIDE Awaiting next month shipment offers from sellers, polyvinyl chloride prices have fallen to US$930/MT in Asia in the week of June 21, 2010. Demand continues to be lackluster particularly in China, in anticipation of a further fall in prices. Weaker import prices have also put downward pressure on the region’s local PVC markets, where producers have had to agree to discounts from their initial June offer levels in order to wrap up their June business in the local market. POLYSTYRENE Polystyrene prices have dipped in line with deteriorating feedstock SM prices that lost almost US$40/ton FOB Korea in the week of June 21, 2010. Sellers’ offers have been pegged at US$1250/MT levels, but buying interest remained pegged about 60 dollars lower. Offers for HIPS also slid to less than the 1300 dollar mark, with buying interest about 30-40 dollars lower. ABS Persistently falling feedstock prices have tanked ABS prices to US$1870/MT in Asia in the week of June 21, 2010 amid muted demand in the region. Offers were pegged at US$1900/MT levels, but buying bids were heard about 45-50 dollars lower. Buyers prefer to wait in the sidelines in anticipation of yet another price revision. STYRENE MONOMER
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