Price trends of oil, polymer feedstock and commodity polymers in Asia for the week ended March 15, 2010

17-Mar-10
CRUDE OIL Oil prices have dipped below US$81 a barrel in the week of March 15, 2010 on release of data showing a drop in US consumer confidence that has renewed concerns about energy demand in USA. Nymex crude for April delivery dipped to US$80.9 from Friday’s US$81.2. Crude oil prices received little support from an International Energy Agency (IEA) report that said world oil demand in 2010 would be slightly higher than previously expected because of growth in developing countries. Conflicting signals about the U.S. economic recovery undermined the oil market. The US dollar was slightly lower against a basket of major currencies - dropping to a one-month low against the euro and a two-week trough against the sterling on Friday, as investors pared back large bearish bets on the two European currencies following strong euro zone economic data. NAPHTHA Despite weakening crude prices, naphtha prices and cracks are stronger. Naphtha prices have strengthened in Asia to US$755/MT CFR Japan in the week of March 15, 2010. But the market sentiment does not seem to be as bullish and most players are still waiting for firmer direction. There is lack of activity from the end-users. Improving sentiments, after demand uncertainties in Japan resulting from Mitsui Chemicals' cracker outage, have propped up naphtha prices, as naphtha crack spreads widened. Despite the improvement, the market remained in a state of fluctuation as players struggled to find market value following two buy tenders from South Korean petrochemical producers for similar cargoes that were concluded at very different price levels. ETHYLENE The dip in ethylene prices was arrested as FOB Korea prices inched up to US$1140/MT in Asia in the week of March 15, 2010. The markets are seeing increased buying activity, pushing prices up on news of a sudden cracker outage at Mitsui Chemicals’ 600,000 tpa cracker. Resin buyers in China have recently reduced orders because they believe that the long-delayed new capacity surge is finally picking up momentum. A bearishness persists in the market outlook of South East Asia on improving supplies from the Middle East. Although many of the new plants in the Middle East and China have yet to stabilise production, they are selling more. Ethylene markets will also become longer, with new merchant-market supply including 115,000 tpa from Shell in Singapore. PROPYLENE Propylene prices have inched up to US$1250/MT in Asia in the week of March 15, 2010 due to supply constraints. 13 propylene facilities are scheduled for regular maintenance during the next few months, leading to a conviction among propylene buyers that supply for the product will remain limited until the summer. News of 4 unexpected propylene outages in Japan at Mitsui and Nippon Oil has aggravated the region’s already heavy maintenance schedule. This supply limitation has also helped to maintain good margins on propylene production. Propylene surpluses are expected to ease tight supplies with the start up of facilities in Asia. Shell Chemicals’ Singapore cracker, in the process of starting up, will have a surplus 440,000 tpa of C3s, as the oil-to-chemicals major failed to attract propylene derivatives investors. Substantial surplus will be available from the Map Ta Phut complex when the Dow Chemical/Siam Cement cracker is on-stream shortly. This will be coupled with 150,000 tpa from Vietnam’s PetroVietnam fluid catalytic cracker and 100,000-150,000 tpa of additional supply from Saudi Arabia. EDC EDC prices steadied at last week’s US$510/MT in Asia in the week of March 15, 2010. In line with quiet VCM and PVC markets and stagnating ethylene prices, EDC prices continue at last week’s levels amid limited firm offers and bids. VCM VCM prices have steadied at US$855/MT in Asia in the week of March 15, 2010 amid steady upstream costs and quiet downstream markets. Prices stagnated at last week’s levels in the absence of most sellers’ offers and buyers bids. Though CFR China prices hold steady, CFR SE Asia prices have escalated by about fifty dollars to the nine hundred dollar mark. STYRENE MONOMER Styrene Monomer prices have spiked up to US$1245/MT in Asia in the week of March 15, 2010 Prices have strengthened with rising feedstock benzene costs. FOB Korea benzene prices spiked past US$900/MT and are expected to rise further as offers have been elevated and deals have concluded above US$900/MT. April shipment offers by SM sellers have been hiked above US$1250/MT levels. POLYMERS POLYETHYLENES: Afflicted by high inventory levels and buyer’s anticipation of the long-awaited flood of new supplies amid labour shortages affecting processors and anxiety over whether the government will take more economic cool-down measures; China’s polyethylene (PE) traders have started re exporting PE to Latin America as per ICIS. Stock levels were heard to be at high levels in China pre-New Year Holidays, followed by reports of low stock levels as prices rose post-holidays. The recovery lasted only a few days followed by three weeks of falling prices. This implies that inventories might have been high, keeping in mind cargoes already booked that had yet to arrive. As an indication of trader panic, resin that had been shipped to China is being re-exported to destinations as far away as Latin America. This type of trade is buzzed to last a few more weeks or until May, as per market grapevine. China often re-exports resin at times of market stress, but the fact that volumes of shipments are large is worrying. The traders involved are going to lose money as container freight rates have recently risen on ship owners taking smaller and older vessels off-line in order to make the economics of big, modern ships work. Chinese resin buyers have recently reduced orders because they believe that the long-delayed new capacity surge is finally picking up momentum. Although many of the new plants in the Middle East and China have yet to stabilise production, they are selling more. Processors and finished goods manufacturers are reported to be unable to run at high rates because migrant workers have yet to return from the countryside following the New Year Holidays. While the high house-price inflation number is a concern, the number of properties sold fell in January-February, suggesting measures already taken to slow the sector down- such as higher land sales taxes, are working. HDPE HDPE prices have dropped to US$1300/MT in Asia in the week of March 15, 2010 as demand from China weakens amid deteriorating domestic prices. CFR China offers from producers were pegged about 25-40 dollars higher, though deals were concluded at lower levels. Market outlook continue sto be bearish as sellers prefer to adopt a wait and watch policy. LDPE LDPE prices in Asia have tumbled to US$1545/MT in the week of March 15, 2010 on lackluster demand in China. Last week, deals were concluded at US$1575/MT levels, but offers have dampened as buyers prefer to wait in the sidelines. LLDPE Weak buying interest in China has pulled down LLDPE prices to US$1385/MT in Asia in the week of March 15, 2010. Few CFR China deals from South Korea have been concluded at the 1400 dollar mark, but most buyers bids have fallen below US$1355/MT levels. POLYPROPYLENE As deal conclusion dwindles, polypropylene prices in Asia have steadied at US$1315/MT in the week of March 15, 2010. PP producers in Asia continue to struggle to conclude deals at prices sufficient to cover production costs based on spot propylene prices. Current offers carry a premium of only US$60-100/ton above spot propylene prices on FOB Korea basis, suggesting that the producers manufacturing these cargoes are operating with negative production margins. Slower than expected post-holiday demand in China has pushed PP buyers throughout the region to the sidelines in anticipation of retreating prices on slackening demand from China. Meanwhile, PP producers continue to face high spot propylene prices despite dwindling PP demand and declining spot ethylene prices, mainly due to limited supplies. Propylene stock levels in China have been accumulating recently, however the high end offers are failing to generate buying interest. Purchases are being deferred as buyers expect to see even lower prices emerging over the short term. POLYVINYL CHLORIDE Awaiting offers for April, PVC prices in Asia have stagnated at last week’s US$1035/MT in the week of March 15, 2010, amid dull market movement. POLYSTYRENE Polystyrene prices have plunged to US$1365/MT in Asia in the week of March 15, 2010 on weak demand from China. Import offers for GPPS and HIPS have tracked a declining trend in Asia as traders elected to reduce prices in a bid to dispose some of their excess inventory build up as March demand failed to live up to their expectations. A Chinese trader was reported to have reduced offers by US$25-40/ton in the week due to lackluster demand and relatively high inventory levels, with preparedness to consider further discounts for serious buyers. Deals were concluded at US$1375/MT levels for material offered at below US$1400/MT for GPPS and CFR China offers for HIPS were lowered to US$1500/MT. Despite the decreasing trend in the import market, distributors are not planning to make any fresh purchases for now in an attempt to pare down their own stock levels. ABS ABS prices have dipped on weak Chinese demand to US$1860/MT in Asia in the week of March 15, 2010. Buying is lackluster as most buyers prefer to buy hand to mouth under current high price levels.
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