Price trends of oil, polymer feedstock and commodity polymers in Asia for the week ended May 31, 2010

02-Jun-10
CRUDE OIL US crude oil for July delivery rose to US$74.4, while London Brent crude settled at US$74.6 in the week of May 31, 2010. Propped by improving economic figures and China's display of support for Europe's recovery, oil prices have risen past US$75 a barrel on Friday. This has taken the week's rally, to over six dollars, making it the strongest in over nine months. China has expressed confidence in Europe's ability to find a path out of its recent debt troubles, US has suspended deepwater drilling for six months in response to the oil disaster in the Gulf of Mexico, amid gains in US and Asian stocks coupled with a US government report that the overall economy grew at an annual rate of 3% in Q1-10 has added momentum to oil markets. NAPHTHA Naphtha prices have picked up momentum in line with crude oil prices in Asia in the week of May 31, 2010. Benchmark Japan open-specification naphtha forward contracts for H1-July delivery settled at US$675/MT. Mid week, naphtha cracks fell to a 7-week low on heavy supplies and weaker petrochemical import demand in China. Apart from the high Western imports, market is faced with concerns over Chinese buyers deferring shipments of plastics due to high stocks and volatile crude prices were also hurting sentiment. ETHYLENE Ethylene prices have collapsed to US$1015/MT in Asia in the week of May 31, 2010. Weaker crude oil and naphtha prices coupled with lackluster derivative demand have pulled ethylene down. As buying requirements dwindle to need basis to avoid stock build up, outlook seems to be bearish. News of credit tightening measures in China and concerns caused by Europe’s debt crisis have affected demand and price despite tight supply amid ongoing cracker turnarounds in the region. PROPYLENE Propylene prices in Asia have fallen to US$1030/ton FOB Korea in the week of May 31, 2010. After stability in the first two weeks of May, spot propylene costs in Asia have been nose-diving since H2-May. Ongoing concerns regarding the global economy and persistently weakening crude oil prices hit PP demand in the region, resulting in producers sourcing feedstock on need-basis to avoid stock build up – adding to the decreases in Asian propylene prices. Since the beginning of May, spot propylene prices have fallen by over US$250/ton FOB Korea, with prices retreating by over US$200/ton in H2-May. Buyers ponder whether rebounding crude oil prices will halt the decreasing trend amid a spate of shutdowns in the region. The propylene plants scheduled for shutdown in the next couple of months are Nippon Oil’s three plants in Japan, Mitsubishi’s three plants in Japan, S.Oil and SK Energy’s plant in South Korea. EDC EDC prices have fallen to US$515/MT in Asia in the week of May 31, 2010, as feedstock ethylene prices crashed and derivative PVC markets seem bearish. VCM VCM prices have fallen to US$830/MT in Asia in the week of May 31, 2010 as derivative PVC market outlook continues to be bearish amid sinking ethylene values. STYRENE MONOMER Styrene Monomer prices have fallen to US$1050/MT in Asia in the week of May 31, 2010, on weaker downstream demand. Feedstock benzene prices have risen past US$815/MT FOB Korea, in line with firmer naphtha and crude prices. However, market players continue to be concerned about the supply length and expected a further downside in benzene prices in Q2-2010. POLYMERS Demand for polymers has been lackluster in Asia, particularly in China, in the week of May 31, 2010. The turmoil in Chinese markets shows no signs of easing, as buying interest continues to be lackluster. Converters in the region prefer to buy on need basis and are in not buying on worries that the European crisis will result in a fall in orders for finished goods. Even a 6% reduction in offers and an assurance of "price protection" has not induced South Asian polyolefin buyers to resume purchases. Buyers prefer to wait on the sidelines in order to see all the prices before engaging in new deals. HDPE Prices have fallen to US$1150/MT in Asia in the week of May 31, 2010. Several Chinese producers have announced large reductions of US$15-40/ton on their offers along with other regional producers, in the hope of spurring greater sales. Distributors are wary as they have no idea when the market might stabilize, converters are faced with reduced end product orders. Although major Asian producers have announced large price cuts on their June offers, sellers offering Iranian and Middle Eastern materials have been able to capture an increasing share of the scant buying interest by undercutting the general market level. LDPE LDPE prices have dropped to US$1385/MT in Asia in the week of May 31, 2010. Domestic producers in China began the week by announcing price cuts. Lower prices in the distribution market coupled with ongoing losses in upstream costs have led to producer’s cuts as distributors and converters continue to be reluctant to conclude deals. LLDPE LLDPE prices sank to US$1225/MT in Asia in the week of May 31, 2010 amid lower prices in the distribution market, collapsing ethylene values and lackluster demand. On the buyers’ side, both distributors and converters are showing reluctance to conclude deals Although major Asian producers have announced large price cuts on their June offers, the market has seen the advent of cargoes from USA priced at less than the 1200 dollar mark. POLYPROPYLENE Polypropylene prices have fallen to US$1245/MT in Asia in the week of May 31, 2010. Despite reduced offers form the Asian producers, they are unable to cope with the lower offers from Middle Eastern producers. Offers pegged at the 1300 dollar mark from Asian producers have been undercut by about 30-50 dollars from producers in the Middle East. Buying continues to be lackluster as upstream markets continue to be volatile, leading to poor demand. To revive buying interest, sellers have lowered offers, or are ready to consider some discounts on unchanged offers for firm bids. Despite the reduction, orders are not being placed for now as buyers are uncertain about the future direction of the market and would prefer to wait and watch further developments. Advent of material from Sinopec Zhenhai’s new 300,000 tpa PP plant has also lent support to the downward movement in China. POLYVINYL CHLORIDE Amid weak converter demand, polyvinyl chloride prices have fallen to US$970/MT in Asia in the week of May 31, 2010. Offers from Asian producers have been heard at the 1000 dollar mark for next month shipment, but have been slashed further on lackluster demand in the region, particularly from China. POLYSTYRENE Polystyrene prices have fallen in Asia in the week of May 31, 2010 amid lackluster demand. GPPS prices have fallen below US$1300/MT, whereas HIPS prices have dropped to US$1400/MT. However, as the markets see a rebound in price of oil, naphtha, benzene, prices are expected to rise. ABS A downtrend in ABS prices continues to fall, settling at levels of US$1900/MT in Asia in the week of May 31, 2010 in line with weaker upstream costs and dull demand in the region.
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