Crude oil prices ended the week of March 22, 2010 at a weaker note. Towards the end of the week, oil prices fell by over US$1.50- its largest one-day dip in three weeks, as the US dollar firmed against foreign currencies, negatively impacting investment flows into oil and other commodities. Oil prices dipped to US$80.6 as the US dollar strengthened against the euro on worries over Greece's debt, and on results of a poll forecast of oversupply in the oil market this year. London Brent crude for May fell to US$79.88.
Naphtha prices have fallen in line with weakening crude oil prices in Asia in the week of March 22, 2010. Prices have been assessed for H2-April at US$745/ton CFR Japan. April naphtha exports from India are expected to fall by 50,000-100,000 tons from levels of 900,000 tons seen in March as IOC halves its naphtha exports for the month. However, the short supply is not expected to elevate prices or impact the markets that are currently under pressure from falling petrochemicals margins due to increased supplies. Also, end users are considering substitution of a small portion of their naphtha feedstock requirements with liquefied petroleum gas (LPG). A key reason that prices have sustained in Asia despite weak demand is the absence of influx of Western barrels coming in for May.
Ethylene prices have inched up to US$1145/MT in Asia in the week of March 22, 2010 amid weakening crude and naphtha costs and bearish sentiments in derivative PE market. The key factor nudging prices up is supply constraints triggered by sudden plant outages including sudden cracker outage at Mitsui Chemicals’ 600,000 tpa cracker. As the markets witness increased buying activity on supply paucity concerns, sellers have increased offers. CFR Far East offers have been heard at US$1155/MT, while offers to Asia have been heard about 40 dollars higher.
Supply constraints have pushed up propylene prices to US$1270/MT in Asia in the week of March 22, 2010. 13 propylene facilities are scheduled for regular maintenance during the next few months, convincing buyers that supply will remain limited until the summer. News of 4 unexpected propylene outages in Japan at Mitsui and Nippon Oil has added to the burden of a heavy maintenance schedule. Start ups are expected to ease the limited avails in Asia- Shell Chemicals’ Singapore cracker with a surplus 440,000 tpa C3, Dow Chemical/Siam Cement cracker, 150,000 tpa from PetroVietnam and over 100,000 tpa of additional supply from Saudi Arabia. Limited deals were heard concluded as buyers resisted the increased offers.
EDC prices have inched up to US$515/MT in Asia in the week of March 22, 2010 on supply constraints. Supplies have been impacted by a 30% reduction in production at Formosa’s 1300,000 tpa EDC plant at Mailiao due to technical problems. Few firm offers were heard in the markets leading to limited deal conclusion. Market outlook could brighten with optimistic view regarding the trend in PVC over the near term, despite weak demand at the moment.
VCM prices have dwindled to US$850/MT in Asia in March 22, 2010 on deteriorating derivative demand. Lackluster demand has pulled down CFR prices by about 25-30 dollars in South East Asia. Supplies will be impacted when Formosa shuts its 780,000 tpa VCM plant in Kaohsiung for 30 days in June. Prices could perk up as outlook for trend in PVC is optimistic over the near term, despite the current lackluster demand.
Styrene Monomer prices have spiked up to US$1270/MT in Asia in the week of March 22, 2010 amid stronger benzene values and solid demand. Benzene prices have increased by over 40 dollars to US$960/MT. On the other hand, excessive styrene stock levels inside China has led to weak buying interest due to chock-a-block storage space in the country. This situation coupled with the upcoming shutdowns in the region are expected to counterbalance each other leaving the styrene market in the middle but vulnerable to crude movements. Asahi is shutting its 390,000 tpa styrene plant in Japan in March and April for 3 weeks maintenance. Nippon Steel’s 240,000 tpa styrene plant will not be operating between March until end April for about 40 days for a turnaround. CNOOC-Shell’s 560,000 tpa styrene plant in China will be shut for an expansion for 8-10 weeks between March and May to raise styrene capacity to 700,000 tpa. Idemitsu will shut its 210,000 tpa styrene plant in Japan and Formosa will shut its 250,000 tpa styrene plant in Taiwan for about a month in April for a turnaround. In May, Samsung Total’s 600,000 tpa plant and Denka’s 240,000 tpa styrene plant will be shut for maintenance.
Domestic offers in China for many polymer products deteriorated throughout March as slower-than-expected post-holiday demand burdened many sellers with excess stock levels which they have been steadily working off through the month. Declining prices in China’s domestic market have taken a toll on price of imports. Import prices are likely to continue to face downward pressure from domestic markets over the near term, as currently they are pegged higher than domestic prices as they have not declined as fast as local prices over the past few weeks. However, as the month draws to a close, China’s domestic markets are expected to show signs of improvement.
In China, traders and distributors are slowly working off excess stock levels built up based on overly optimistic demand growth forecasts seen pre-lunar New Year holidays. In addition to pulling down prices inside China, the large volume of re-export offers is beginning to have an impact on other global PE markets, altering supply/demand balances and making buyers reluctant in their purchases regardless of the state of local demand. With the US proving unsuitable as a destination for their excess stocks, traders in China have explored other re-export markets such as Africa and Turkey. In Southeast Asia, the supply glut in China has pushed back buyers to the sidelines after robust regional demand in regional markets at the beginning of the month. Re-export offers from China have also begun to appear in the Indian market, helping pull down import prices to India over the past few weeks, which prompted domestic producers to slash their offer levels to the local market by over US$100/ton this week. Distributors in India are also receiving re-export offers from traders in Pakistan and the Middle East.
HDPE prices have dipped to US$1275/MT in Asia in the week of March 22, 2010 as markets remained lackluster amid weak Chinese demand. Traders and distributors are slowly working off excess stock levels built up based on overly optimistic demand growth forecasts. April shipment film grade material from Taiwan is being offered at US$1350/MT levels, but very few deals were concluded as markets remained unenthusiastic. CFR China deals for Middle East material were heard concluded about 90-100 dollars lower than offers from Taiwan. Over the course of the past two weeks, Southeast Asian buyers received a number of offers for deep-sea HDPE film origins from Chinese traders, which gave the market another source of cheap supply but did not have a direct impact on offers for mainstream origins. This week, however, the quantum of re-export offers from China has grown in number, shifting away from deep-sea origins and towards more mainstream cargoes. These offers weakened buyers’ willingness to accept higher end offers. In addition to pulling down prices inside China, the large volume of re-export offers is beginning to have an impact on other markets, altering supply-demand balances and making buyers reluctant in their purchases regardless of the state of local demand.
Unenthusiastic demand from China amid large volume of re-export offers from China to global markets has tanked LDPE prices to US$1505/MT in Asia in the week of March 22, 2010. Prices from domestic producers fell in China as demand continued to be soft. April shipment CFR China offers from the Middle East fell below the US$1500 mark while deals from USA were concluded about 50 dollars lower.
LLDPE prices dropped below US$1360/MT in Asia in the week of March 22, 2010 on downbeat demand from China. Market outlook is deteriorating not only inside China, but also in other global markets as re-export volumes increasing from China is beginning to have an impact on other global PE markets, affecting supply-demand balances and resulting in disinclination to purchase from the buyers irrespective of the state of local demand. The market awaits offers for next month shipment from South Korea even as producers from Taiwan are reluctant to reduce notional offer prices below the 1400 dollar mark.
Polypropylene prices in Asia have fallen to levels below the 1300 dollar mark for next month shipment. Reduced offers have failed to fuel enthusiasm in the market and demand from China continues to be soft. The market awaits April shipment offers from South Korean producers, even as offers from Taiwan have been heard around last week’s levels. CFR China deals for few cargoes from Middle East were concluded at US$1315/MT for H1-April shipment.
As producers roll over offers for April, PVC prices in Asia have stagnated at last week’s US$1035/MT in the week of March 22, 2010. Domestic offers have been on a steady to firm trend since mid-week. Trading activity has picked up recently as buyers returned to the market to make more purchases after the declines of the past few weeks. Further discounts on seller’s offers will not be possible due to persistently firm upstream costs. A major producer from Taiwan announced new offers at US$1040/ton CFR China, preferring to maintain offer levels due to tight supplies and optimistic view regarding the PVC trend over the near term, despite soft demand at the moment. A Thai and South Korean producer also followed the same policy as they renewed their April prices from March levels at US$1040/ton on CFR China main port. Though deals have not been concluded, sellers believe PVC prices will follow a stable trend over the near term.
Polystyrene prices have weakened to US$1350/MT on weak demand from China notwithstanding stronger feedstock benzene and SM costs in Asia in the week of March 22, 2010. CFR China offers for April for GPPS at US$1390/MT have met with buyer reluctance as buying interest dips below US$1350/MT. CFR China offers for HIPS also deteriorated to US$1450/MT. Asian PS offers headed south as sellers aimed to generate better buying interest. Initial April offer levels from producers represent US$10-30/ton decreases compared to the March offers triggered by higher stock levels with the sellers. Overall PS demand continues to be unsatisfying but players expect demand to perk up in April, as it is the traditional high season for PS applications. All these factors point to a stabilized outlook for PS transactions in China for the near term.
ABS prices have dipped on weak Chinese demand to US$1855/MT in Asia in the week of March 22, 2010 amid pessimistic buying. Most CFR China offers were heard above US$1900 mark, but weak buying interest is pegged about 35-50 dollars lower. The market awaits deal conclusion.