An almost 5% rise in crude oil prices in the week of May 26, 2008 can be attributed to a surprise fall in US inventory levels accompanied by a forecast by leading analyst of a continuing price rise due to supply constraints and demand growth. As supply concerns intensified and the dollar weakened further, oil prices have peaked to new highs, rising to US$132 a barrel on the New York Mercantile Exchange. Commodities such as oil are a hedge against inflation particularly when the dollar is weaker. A weak dollar also makes oil less expensive to buyers dealing in other currencies. Particularly strong demand for diesel has been witnessed in China, where power plants in some areas are running short of coal and earthquake-hit regions are relying on diesel generators for power. The country is also ramping up diesel imports ahead of the Olympics driving up prices. A statement by OPEC that it will not boost output before its September meeting has jolted the US market. Markets in USA will see improved demand for gasoline and diesel as the summer driving season begins.
Naphtha price in Asia in the week of May 26, 2008 have spiked by eighty dollars past the 1100 mark, in line with rising crude oil values. Prices for H2-June delivery settled at US$1110/MT CNF Japan.
Upbeat crude and naphtha prices have failed to have a major impact on ethylene prices in Asia in the week of May 26, 2008. Ethylene prices remained unchanged from last weeks' US$1420/MT. Buying intentions hovered at last weeks' levels despite seller intention almost fifty dollars higher at US$1500/MT FOB Korea.
Unlike ethylene prices, propylene prices moved up sharply to US$1530/MT in line with rising crude and naphtha values in Asia in the week of May 26, 2008. Rising input costs were coupled with limited material availability. Higher naphtha costs are pressing sellers' intentions to rise to US$1600/MT CFR, but expectations of improved supply situation next month has kept buying bids from Chinese buyers lower.
Robust downstream PVC markets are supporting a gain in VCM prices. VCM prices that have moved up to US$965/MT in Asia in the week of May 26, 2008 are expected to gain further support by rising PVC prices for June shipment. Selling intention for June cargoes, heard at US$1000/MT CFR China are being met with resistance from Chinese end-users, disinclined to accept offers at such high levels. The tussle between buyer and seller could result in settlement of June deals at levels around US$980/MT CFR China.
The earthquake in China's Sichuan province has led to disruptions in production at carbide based PVC plants in the region. The domestic output cut has led to growing demand for PVC from China. This emergent demand coupled with strong downstream markets has moved EDC prices to US$455/MT in Asia in the week of May 26, 2008. With robust demand from China expected to continue, selling intentions have been at optimistic levels of US$500/MT CFR Asia.
Robust crude and feedstock benzene prices have taken their toll on styrene monomer prices in Asia in the week of May 26, 2008. Styrene Monomer offers for July shipment spiked by hundred dollars to US$1615/MT, with transactions concluded at US$1610/MT FOB Korea. Global crude oil prices coupled with limited availabilities have propped up benzene prices by over eighty dollars during week.
With effect from 1 June 2008, China will ban use of ultra thin plastic bags and the free giveaway of carrier bags in stores. The government has banned the use of bags with a thickness less than 0.025 mm. With this ban, it is predicted that the use of plastic shopping bags will reduce by 40% after 1 June. This has affected demand for film grade HDPE in China. Price for film grade rose to US$1655/MT in Asia in the week of May 26, 2008, as against June offers for yarn and injection grades being quoted at US$1690/MT CFR China, rising in line with restricted supply.
Restricted supplies have moved LDPE prices up to US$1800/MT in Asia in the week of May 26, 2008. June offers from producers in Qatar and South Korea heard at about US$1800/MT, were met with buyers resistance.
Markets of LLDPE firmed up to US$1680/MT in Asia in the week of May 26, 2008. June offers were hiked to around US$1700/MT CFR China.
Restricted supplies and escalating feedstock propylene prices have propelled PP prices in Asia past the 1700 mark to US$1720/MT in the week of May 26, 2008. Conclusion of deals at the 1700 dollar mark has sent most offers for June shipment atleast twenty dollars higher. Sellers from South Korea, Taiwan as well as India have hiked PP offers for yarn/injection grade past 1720/MT.
Poly Vinyl Chloride prices for June shipment in Asia have moved up to US$1190/MT in the week of May 26, 2008 rising by over thirty dollars in line with robust feedstock prices. Offers from Taiwan, South Korea and Japan have been settled at US$1200/MT. June offers for ethylene based PVC resin from China moved up to US$1170/MT, while carbide based PVC resin was heard at US$1150/MT
Extremely strong gains in crude oil and feedstock styrene monomer prices have pushed up GPPS prices in Asia to US$1575/MT in the week of May 26, 2008. Offers quoted in the week at US$1600/MT suddenly shrunk as sellers prefer to wait and quote after feedstock prices surged once again. An estimated 30-50 dollar hike is anticipated as offers get corrected in line with the higher feedstock values.
The week of May 26, 2008 witnessed ABS prices in Asia spiraling to US$1960/MT corresponding to input increases as prices of feedstock SM, butadiene and ACN shot up. Positive market outlook could do very little to lift both buyer and seller sentiments, as both the counterparts prefer to wait and watch in this volatile market scenario. Demand for ABS from Chinese processors has declined considerably this year as prices continue to rise. Producer margins have also taken a beating, as the production costs seem unrecoverable, even at US$2000/MT.