Price trends of oil, polymer feedstock and commodity polymers in Asia for the week ended May 22, 2011

02-Jun-11
OIL Oil prices ended the week of May 22, 2011 on a weaker note at US$98 as Europe's sovereign debt crisis deepened, bolstering concern that economic growth will slow and fuel consumption decline, amid a strengthening dollar that rose to a nine-week high versus the euro. Brent crude oil settled at US$110. A factor preventing oil prices from sliding further is the ongoing social unrest in Libya and Syria and fears that it may spread to other oil-exporting nations in the region. If NATO manages to oust Gaddafi soon, Libyan supplies may start to return to the market, putting pressure on prices. Participants were also watching the Mississippi flooding situation after the US Army engineers opened a key spillway to relieve flooding along the river. Failing to open the spillway would have put New Orleans at risk of flooding. In addition to threatening densely populated areas, lower Mississippi flooding was a risk for as many as 8 refineries and at least one nuclear power plant. The refineries make up about 12% of the nation's capacity for making gasoline and other fuels. NAPHTHA Naphtha prices ended the week of May 22, 2011 at US$956/MT levels. Midweek, prices in Asia fell to its lowest in ten days and cracks hit a 5 week low as a cracker outage at Formosa weighed on sentiment. Taiwan's Formosa shut a 700,000 tpa No. 1cracker following a fire at a liquefied petroleum gas (LPG) pipe, and the unit is to stay offline until H2-June. Front-month H1-July prices fell by about twenty dollars to US$958/ton, while cracks fell to US$124/ton premium. ETHYLENE Ethylene prices dropped by about 25-30 dollars to US$1315/MT in Asia in the week of May 22, 2011. Spot prices have dropped amid buying intentions that have dampened in anticipation of easing supply. Limited avails due to cracker shutdowns had kept prices at highs in northeast Asia. The supply situation is expected to ease as an increasing number of crackers start coming back online. Mitsubishi Chemical Corp has restarted its 453,000 tpa No 2 naphtha cracker at Kashima. Idemitsu Kosan is running its 374,000 tpa naphtha cracker in Chiba, Japan, at almost 100% following completion of a scheduled turnaround from 27 March to 18 May. Its 623,000 tpa naphtha cracker at Tokuyama is also running at close to full capacity. Korea Petrochemical Industry Co (KPIC) has restarted its 470,000 tpa cracker at Onsan on 23 May and is currently running the unit at full tilt. The company also resumed production at its downstream high-density polyethylene (HDPE) facility, and operating rates at all lines are currently at 80% or higher. Shell is also back on track with its 800,000 tpa cracker at Bukom Island, hence spot ethylene demand will weaken further. PROPYLENE Propylene prices have moved down to US$1585/MT in Asia in the week of May 22, 2011. In addition to slower derivative demand, propylene prices have been pushed lower by rising supply levels from Japan and South Korea. Crackers in South Korea are beginning to return to normal operations following a heavy cracker maintenance season while the restart of some crackers in Japan which had been shut following the massive earthquake on March 11 reduced demand from buyers looking to cover the shortage of Japanese cargoes. EDC Ethylene dichloride (EDC) prices have steadied at US$540/MT ton in Asia in the week of May 22, 2011 as downstream PVC markets see a roll over in prices. VCM Feedstock VCM was stable at US$1055/MT in Asia in the week of May 22, 2011 amid steady upstream and downstream costs. STYRENE MONOMER Styrene costs are considerably softer amidst volatile crude prices. In Asia, spot styrene offers lost over US$60/ton since the beginning of the month. This decrease is due to the slow demand in China. Further decreases are anticipated in the market, given the lower benzene prices in the region amidst fluctuating oil costs. POLYMERS Polymer prices and outlook has been damp in Asia in the week of May 22, 2011. A downtrend is being seen in Chinese markets as buying interest deteriorates amid tightening of credit policy that has impacted purchasing power. Domestic material continues to be available lower than imports. Demand for imports has also been hit in China in anticipation of reduction in converter operating rates expected due to power shortages. Buyers across the region prefer to wait in the sidelines amid volatility of crude, naphtha and feedstock prices. HDPE HDPE prices have stagnated at US$1370/MT in Asia in the week of May 22, 2011. After successful conclusion of CFR China deals for film grade at these levels, offers were hiked to US$1400/MT levels. However, no deal conclusion has been reported at these offer levels. LDPE LDPE prices have dropped to US$1640-1650/MT in Asia in the week of May 22, 2011. CFR China offers from Asia heard at US$1600-1675/MT have seen limited buying interest for hand to mouth requirements. CFR China offers from the Middle East were heard past US$1725/MT have met with no buyer interest. LLDPE LLDPE prices have fallen to US$1340/MT in Asia in the week of May 22, 2011. Offers have fallen by about 20 dollars since last week, but have failed to evoke much buying interest. CFR China offers from Asia at US$1400-1425/MT for May shipment attracted bids at levels below US$1360/MT. POLYPROPYLENE Polypropylene prices have fallen to US$1665/MT in Asia in the week of May 22, 2011. Import homo-PP prices in China are facing downward pressure from more competitive domestic prices and weakening import prices in Southeast Asia, as per Chemorbis. Higher import homo-PP prices in SE Asia vs the prevailing import prices to China for the past several weeks, has helped encourage sellers to take a firmer stance on their prices to the Chinese market, while a number of Chinese traders have been actively looking to re-export their stocks to Southeast Asia and other global markets. However, these traders are having an increasingly difficult time concluding re-export deals to SE Asia as prices are beginning to soften in the region in the face of persistently sluggish demand. CFR China import homo-PP prices have been steady for the past three weeks, with sellers unwilling to reduce prices as overseas producers are operating below theoretical production costs even at the upper end of the overall range. Domestic homo-PP prices inside China have also held mostly steady over the past three weeks, although distributors reduced their prices by around CNY100-200/ton (US$15-31/ton) last week. Domestic producers have adjusted pricing policy such that they are prepared to give retroactive discounts to their customers, suggesting that domestic homo-PP prices will move lower over the near term. POLYVINYL CHLORIDE PVC prices have steadied at US$1230/MT in Asia in the week of May 22, 2011 amid dull demand and market outlook. The market awaits offers for June. Supply in the region continues to be limited on plant shutdown in Japan. Producers wait to announce import PVC prices to China for June, as they feel uncertain about the market outlook for the coming month owing to volatile upstream costs and a recent outage at Formosa's petrochemical complex in Mailiao, Taiwan, as per Chemorbis. Players are divided as to the likely impact of Formosa's outage on PVC supply in the coming month. PVC prices were pushed higher in April and May owing to persistent PVC and VCM shortages following the March 11 earthquake in Japan, Asia's largest VCM producer. Players in Southeast Asia report that VCM shortages within the region are beginning to ease this week while traders in China say that Japanese PVC producers are set to return to the market soon after having been largely absent from the market for the past two months. May import PVC business for Asian origins to China has been mostly concluded with increases of US$40-75/ton from the April done deal level. Earlier this month, players had predicted that June import offers would be initially announced with increases of around US$20/ton from May done deal level. The expected June increases were questioned towards the middle of the month as crude oil prices declined below the US$100/barrel threshold to hover between US$96-103/barrel after beginning the month above US$113/barrel on the Nymex. The recent outage at Formosa's Mailiao complex has renewed expectations of higher prices for June, with most players currently predict initial June offers to be announced early next week with rollovers to increases of up to US$20/ton from May done deal levels. PVC demand has been relatively strong within China over the past month, with most converters increasing raw material purchases in accordance with the impending high season in the construction sector. Demand has faltered a bit this week as lower futures prices for PVC and carbide have encouraged buyers to adopt a wait and watch approach for the near term in a bid to get a clearer idea of the market direction. Although demand for end products is picking up, converters complain of operating with reduced margins owing to persistently rising raw material prices. In Southeast Asia, local PVC prices for June are expected to be stable to softer from May as supply concerns are beginning to ease within the region, while demand has begun to stall as the upcoming rainy season in the region is expected to depress demand while buyers are also hesitant to purchase owing to the widespread uncertainty as to the future market direction. Import prices have lost ground on the higher end of the range over the past two weeks as sellers have had to step back on prices now that supply is loosening in the region, while traders offering at the lower end of the range are no longer willing to give discounts on their offers given the present uncertainty as to the medium term supply outlook. POLYSTYRENE In China, import prices retreated for both dutiable and non-dutiable origins by US$10-20/ton at the low end and they remained stable at the high end of the ranges over this past week. Overall demand is still slow in the country as most buyers expect to see further decreases given the softer upstream costs amidst quiet demand. PET Global PET prices have been losing ground in China on the back of the weaker buying interest as well as the softer upstream costs, as per Chemorbis. A similar downward trend is also observed as South Korean producers' export PET prices lost US$50-60/ton on FOB Busan basis when compared to the previous week on the back of the softer upstream costs and slow demand. In China, export offers were also lower by US$20/ton at both ends of the overall offer range on FOB China basis compared to the previous week. Plus, the high end of the offers became scarcer towards the end of the week, according to the players' reports. Meanwhile, PET producers are willing to offer additional discounts in return for firm bids in order to generate some buying interest as they are still supported by their comfortable margins. Looking at the upstream costs, spot PX offers lost ground by US$65/ton on FOB Korea basis while spot PTA retreated by US$120/ton and spot MEG lost US$40/ton on CFR China basis when compared to the beginning of May.
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