Crude oil ended the week of May 1, 2011 at US$111.8 from an opening week price of US$113.6. Oil prices have dropped from a 31 month high as signs of a faltering global economic recovery stoked speculation that demand for crude will decline. This fall has trimmed an unprecedented eighth monthly gain, after data showed South Korea’s industrial production and US economic growth missed analysts’ forecasts. Reports are expected to show US spending cooled and businesses grew at a slower pace in the world’s biggest crude-consuming nation. Fears abound that slightly bearish US Q1-GDP is an indication of the recovery slowing down, with bearish implications on oil demand.
Naphtha prices in Asia rose past US$1100/MT in Asia in the week of May 1, 2011. Midweek, naphtha price was at a fresh 33 month high amid robust global crude futures and reduced deep-sea supply from the West. Naphtha cargoes from northwest Europe and the Mediterranean were estimated to be 250,000 tons for May arrival in Asia, down sharply from the regular monthly arbitrage imports of around 300-500,000 tons.
Ethylene prices have stagnated at US$1355/MT in Asia in the week of May 1, 2011. Prices have not risen in line with rising crude and naphtha amid lackluster trading in China. Markets have been dull as some derivative markets weaken amid a decision by the Chinese government to raise interest rates for a second time this year. In the spot ethylene market, prices did not show much change on CFR Northeast Asia basis but they gained US$125/ton on CFR Southeast Asia basis with respect to the beginning of April, as per Chemorbis. By mid-April, spot ethylene prices firmed up significantly on the back of the supply issues triggered by Shell Singapore’s prolonged shutdown at its 800,000 tpa steam cracker, where operations were halted on March 18 due to a compressor problem. Cracker shutdowns continue in Asia as ExxonMobil’s 900,000 tpa cracker was shut on March 8 for 9 week of maintenance. Meanwhile, Thai PTTCH plans to halt operations at their 400,000 tpa ethylene plant in Thailand during H1-2011 for a 48 day turnaround.
Propylene prices have risen to US$1580/In Asia in the week of May 1, 2011 on persistent high offers from sellers. Sellers were unable to offer any reductions amid persistently stronger oil and naphtha prices.
Ethylene dichloride (EDC) prices have steadied at US$545-550/MT in Asia in the week of May 1, 2011 amid stagnant ethylene costs and downstream VCM costs.
VCM prices have stabilised at US1060/MT in Asia in the week of May 1, 2011 amid tight supply. Supply has been restricted due to shutdowns at several plants in northeast and southeast Asia that has resulted in reduction in run rates at downstream PVC producers.
Styrene monomer prices have seen robust increases in Asia, with support from strong oil prices that continue to hover above US$100/bbl, as per Chemorbis. Asian styrene prices gained US$120/ton FOB Korea basis when compared to the beginning of April, supported by firming oil prices and strong styrene demand from China amid shutdowns and lower operating rates. South Korea’s LG Chem shut down three styrene plants for a planned turnaround, and withdrew offers from the spot market in March-April. Presently, these plants are reported to have restarted and running at full capacity, but are not expected to provide spot styrene to the market during May. Ellba-Eastern, a Shell and BASF joint venture, declared force majeure on its 550,000 tpa styrene monomer/propylene oxide plant in Singapore, which was shut on March 22. The plant was restarted in mid-April and is reportedly running at 60-80% capacity. However, the force majeure remains in place as Shell has not lifted the force majeure on output from its ethylene cracker at Pulau Bukom. Japan Asahi Kasei lowered operating rates by 10% compared to March during April at their 710,000 tpa styrene plant while Taiyo Petrochemical in Japan also lowered operating rates by 20% at the 370,000 tpa styrene plant to 80% capacity. South Korean YNCC’s 285,000 tpa styrene plant was shut at the beginning of April for 4 weeks maintenance while Samsung Total’s 930,000 tpa styrene plant in Korea was down for a turnaround between April 6 and May 22. During the shutdown of the company’s No.1 and No.2 plants, 80,000 tons of output is expected to be lost. FOB Korea benchmark for feedstock benzene in Asia was assessed at US$1225/MT.
HDPE prices rose to US$1400/MT in Asia in the week of May 1, 2011 on comparatively better demand for HDPE and HDPE film stocks inside China. Improved market sentiments were triggered by Sinopec’s plan to reduce HDPE and LLDPE production. Concerns of resultant tightening supplies led traders to replenish stocks, but failed to lift buying interest for imports due to abundant avails of locally produced material at lower prices. Inability on part of converters in Southeast Asia to pass on rising raw material costs has led to need based buying there, resulting in weak sentiments. CFR China offers for May were heard at US$1450/MT from Saudi Arabia and Thailand, but met with buying interest about 30-40 dollars lower.
LDPE prices have inched up to US$1680/MT in Asia in the week of May 1, 2011. CFR China offers from the Middle East and Malaysia were heard at US$1720-1730/MT, but failed to evoke buying interest above the 1700 dollar mark.
LLDPE prices have stagnated at US$1370-1380/MT in Asia in the week of May 1, 2011 on seasonally slower demand amid high LLDPE film stocks. Seasonally slower demand for LLDPE film has also contributed to the weakness in prices, amid high stocks. HDPE and LLDPE film prices are currently trading at close to par in both China and Southeast Asia. Prices are assessed as stable to rising amid negotiations in China’s polyethylene markets and improved market sentiment triggered by Sinopec’s plan to reduce production. Concerns of resultant tightening supplies led traders to replenish stocks, but failed to lift buying interest for imports due to abundant avails of locally produced material at lower prices.
Polypropylene prices have risen to US$1700/MT in Asia in the week of May 1, 2011. Several naphtha based producers adopted a wait and watch stance due to weak demand amid weak buying interest due to ample avails of domestic material at lower prices. Most traders in the SouthEast are buying only need based as they find it difficult to pass on the raw material costs to their downstream buyers.
Polyvinyl chloride prices rose to US$1225/MT in Asia in the week of May 1, 2011 amid persistent limited avails from Japan. Currently, buying interest is limited by high prices. Demand is beginning to pick up in China at the onset of summer which is a high season for PVC. Players in Asia are predicting another month of PVC price hikes, although the rate of increase is expected to slow down following the rapid increases observed over the past two months, as per Chemorbis. While PVC supplies remain tight, more material is expected to be available next month as several plants in Japan and Southeast Asia will resume production. Chinese producers have been exporting in larger than normal amounts over the past month due to more competitive prices in overseas markets when compared with the domestic Chinese market. Malaysian producers have left prices unchanged last week owing to renewed resistance from buyers as well as some loosening in local supply. Domestic PVC prices steadied in Vietnam, as supplies eased with the restart of a domestic plant amid ample supplies from China and Japan.