Price trends of oil, polymer feedstock and commodity polymers in Asia for the week ended June 28, 2010

30-Jun-10
CRUDE OIL Crude oil has witnessed volatility in the week of Jun 28, 2010. Oil started the week at US$76 a barrel and sharply rose above US$79 by end of week. Rough weather in the Caribbean Sea threatened to progress into a hurricane in the Gulf of Mexico, pushing oil prices up on speculation that oil supply could be damaged. As dangers of the severe storm ebbed, crude oil prices have steadied at US$$79 a barrel. Crude oil futures had a marginal dip in Asia on Monday, but remained supported on expectations of higher gasoline demand ahead of the Independence Day holiday in USA. Oil price rise accelerated as the dollar weakened against the euro. NAPHTHA Despite rising crude oil prices, naphtha prices have fallen by 30 dollars in the week of June 28, 2010. Open-spec prices for H2-July delivery settled at US$665/MT CFR Japan. Mid week, open spec naphtha for H1-August fell to US$659/MT CFR Japan. Taiwan’s Formosa locked in 200,000 tons for August arrival at a discount of US$4-5/MT to Japan spot quotes on a cost-and-freight (C&F) basis. With this, its total spot purchases since June 17 for end-July-August delivery is at 400,000-450,000 tons, despite marginal improvement in demand and sentiments in Asia, mainly due to increased supplies to Europe where a supply constraint persists. In South Korea, Samsung Total is seeking volumes between 400,000 to 600,000 tons for September 2010-August 2011 delivery. ETHYLENE Ethylene prices have steadied at US$900/MT in Asia in the week of June 28, 2010 amid lackluster demand from downstream markets. Spot ethylene prices on CFR Northeast Asia basis are down US$60/ton from the beginning of the month. Offers have been heard at US$930-940/MT levels, but deals await to be concluded. PROPYLENE Propylene prices have moved up to US$1085/MT in Asia in the week of June 28, 2010 as supply begins to get constrained on planned propylene shutdowns in the region. EDC Persistently falling PVC demand and weakening downstream markets amid deteriorating ethylene values, has softened EDC prices in Asia to US$445/MT in the week of June 28, 2010. VCM VCM prices have weakened to US$755/MT in Asia in the week of June 28, 2010. Lackluster demand and pessimistic market outlook from downstream markets coupled with limited sell offers has influenced a fall in VCM prices. STYRENE MONOMER Styrene Monomer prices have fallen in line with lackluster demand to US$1005/MT levels in Asia in the week of June 28, 2010. Despite a fall in July shipment offers to US$1005/MT, buying intentions was pegged below US$1000/MT FOB Korea. Feedstock benzene prices have fallen below US$800/MT as demand continues to be dull. POLYMERS Polyolefin prices in China are likely to face downward pressure over the next few months due to several factors including a persistent inventory overhang, supply glut from new capacities, weak construction and auto markets, along with falling US PE prices that raising concerns over very competitively-priced imports from USA as per ICIS. A further negative factor in China could be the strengthening yuan, which could encourage price-cutting by local suppliers. POLYETHYLENE A downtrend persisted in spot PE prices in Asia this week amid persistently poor buying interest. As per Chemorbis, the pace of the decreases has slowed down in general, while a few products saw some slight up-ticks at the low end of the overall range, since PE sellers are beginning to face cost pressure as upstream crude and naphtha prices have firmed up while Asian ethylene prices have declined at a slower rate than PE prices since the beginning of June. Although spot ethylene prices are down US$60/ton CFR Northeast Asia since the beginning of June, theoretical costs calculations based on spot ethylene prices suggest that many producers are operating with low or even negative margins as spot PE prices have declined at a faster rate than ethylene prices this month. One of the main factors contributing to the steep losses seen in Asia’s PE markets this month has been oversupply concerns, fed both by the imminent start-up of new capacities in Asia and the Middle East and by excess stock levels with Chinese traders. While new capacity issues remain prevalent in the market, particularly after the recent start-up of Sinopec Zhenhai’s new 450,000 tpa HDPE/LLDPE swing plant in China which is expected to start shipping product at the end of this week, traders are reporting some improvement on their own oversupply situation as they have curtailed imports and are actively working to re-export their excess stocks to other markets. News of some recent plant shutdowns in Iran have also provided temporary relief to the market’s supply woes. However, players are still concerned about the possibility of attractive deep-sea offers from the US entering the Asian market in large volumes, as softer ethylene prices in the US make it possible for American PE sellers to enter the global markets with very competitive prices. HDPE HDPE prices have steadied at US$1120/MT in Asia in the week of June 28, 2010 amid limited deal conclusion in the absence of seller’s offers and buying bids. CFR China offers for SE Asian cargoes were heard at US$1100-1125/MT levels, while offers from Taiwan were heard past the US$1150/MT mark. There is a general improvement in the oversupply situation with traders, who have curtailed import market while actively working to re-export their excess stocks coupled with news of recent plant shutdowns in Iran. However, start-up of Sinopec Zhenhai’s new 450,000 tpa HDPE/LLDPE swing plant is expected to start shipping product shortly- this could lead to a supply glut LDPE Limited deal conclusion has caused LDPE prices to dip marginally to US$1325/MT in the week of June 28, 2010. LLDPE LLDPE prices have stagnated at US$1165/MT in Asia in the week of June 28, 2010. Start-up of Sinopec Zhenhai’s new 450,000 tpa HDPE/LLDPE swing plant, expected to start shipping product shortly, is expected to impact prices and market outlook POLYPROPYLENE Asian PP prices have inched up to US$1200/MT, holding largely steady during the week of June 28, 2010. July shipment offers have been heard at slightly raised levels of US$1225-1250/MT, in line with rising cost of feedstock propylene. Cargoes from the Middle East were traded at levels around US$1200/MT and offers from South Korea have been heard about 30-40 dollars higher.Weakening prices in other polymer markets are beginning to weigh down sentiment in China’s local PP market, with distributors commenting that PP prices cannot sustain a steady trend given the rapid erosion seen in PE prices. PVC PVC prices have dropped to US$895/MT in Asia in the week of June 28, 2010 amid pessimistic market outlook and sentiments. CFR China July delivery cargoes were traded toward China at around US$850/MT. POLYSTYRENE Polystyrene prices have collapsed to US$1155/MT in Asia in the week of June 28, 2010 due to lackluster demand in the region and deteriorating prices of feedstock styrene monomer. GPPS market prices were assessed at around US$1150/MT, while HIPS market prices dropped below the1300 dollar mark. ABS ABS prices continue to fall to US$1850/MT, in line with falling upstream costs and deteriorating demand. Very few deals were concluded as sellers’ offers continue to hover below US$1900/MT while buying interest remains 50 dollars lower.
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