Price trends of oil, polymer feedstock and commodity polymers in Asia for the week of August 25, 2008

26-Aug-08
CRUDE OIL Instability prevailed in crude oil movement in the week of August 25, 2008. The week witnessed a five dollar leap in prices on signs of a weakening dollar and on news of a missile-shield agreement between USA and Poland that has intensified fears that Russia may disrupt oil flow. By Friday, crude oil witnessed its largest drop in percentage terms since December 2004, by over six dollars-as the US dollar strengthened and BP Plc restored shipments on a Caspian Sea pipeline through Turkey. The Baku-Tbilisi-Ceyhan pipeline, which moves oil from Azerbaijan through Georgia to Turkey's Mediterranean coast, resumed normal flows after a fire shut it earlier this month. Monday morning witnessed a drop in oil prices to US$114.5 in Asian trade as the US dollar gets stronger. The dollar's movement this week will be the key influence on oil prices. The market is also looking forward to a meeting of OPEC in September. NAPHTHA As oil prices displayed volatility during the week, naphtha prices rose in line with rising oil prices. Prices for naphtha in Asia in the week of August 25, 2008 have crossed the thousand dollar mark. Open-spec naphtha prices rose by about forty dollars to US$1040/MT CNF Japan for H1-Oct delivery. ETHYLENE As market sentiments continue to be bearish, the strain to conclude deal grows stronger, sellers are dropping offers for ethylene. Ethylene prices in Asia fell by almost fifty dollars to US$1310/MT in the week of August 25, 2008. Asian demand, however, still persists to be feeble, because downstream polyethylene producers continue to be saddled with large stockpiles as sales in Chinese markets remains sluggish. PROPYLENE Lackluster market sentiments and feeble demand for propylene was witnessed in Asia as a result of very soft downstream demand due to high levels of inventory with polypropylene (PP) producers. These large stockpiles with several downstream PP producers were a result of production cuts by Chinese processors and inability to conclude sales towards China. Pessimism prevailed in the propylene markets and prices plunged by over fifty dollars to US$1400/MT FOB Korea, as pressure to sell increased in Asia in the week of August 25, 2008. Sellers continue to offer CFR China material at around the 1500 mark, but dull demand has weakened buyers' bids to US$1450/MT. VCM Gloomy market outlook of downstream PVC continues to exert pressure on VCM. VCM prices have dipped to US$945/MT in Asia in the week of August 25, 2008. Though sellers have not adjusted prices very radically, buying intent is being heard at around 900 dollar. The feeble market outlook has sunk buying bids for September by almost seventy dollars. The market awaits offers for September as sellers are being challenged by buying interest at US$900/MT CFR China. EDC EDC prices have dipped to US$495/Mt in Asia in the week of August 25, 2008, on plunging input ethylene costs coupled with expected invasion of cheaper material. The awaited advent of cheaper EDC cargoes from USA has kept Asian buyers away from offers from Asian suppliers. The lackluster demand for EDC from the housing and construction segment is USA has resulted in considerable amount of cargoes being dispatched to better demand regions of Asia. Styrene Monomer Restricted avails of Styrene Monomer in China due to falling inventory levels, has elevated domestic prices, leading to firmer prices in Asia. The supply issues coupled with rising crude and input benzene costs, have lifted SM prices to US$1495/MT in Asia in the week of August 25, 2008. Feedstock benzene prices saw a quantum leap of about forty dollars to US$1180/MT levels. A CFR China deal was heard concluded at US$1530/MT levels, and FOB Korea offers hovered around US$1510. However, market sentiment seems to be poised for reversal, with buyer's bids dipping by about $25. Several end users have hoarded material at lower prices and are loaded with larger than normal stockpiles; hence demand will be subdued from their end. South Korean Cheil Industries has cut production runs at its ABS plant by 20%, affecting demand for feedstock. POLYMERS HDPE HDPE prices have dipped to US$1735/MT in Asia in the week of August 25, 2008. Production cuts implemented by Chinese producers did help domestic prices to rebound, but failed to elevate the mood in HDPE markets of Asia. Demand from China continues to be lethargic, compelling several Asian suppliers to drop offers. CFR China HDPE offers from Thailand and Singapore have been cut to US$1750/MT and their South Korean counterparts are quoting $20 lower, but were met with resistance from buyers whose interest continues to be pegged fifty dollars lower. Markets may see some revitalization early next month on a supply cut caused by a planned 3 week annual maintenance shutdown at Formosa's 350,000 tpa HDPE plant. LDPE Unenthusiastic demand from China continues to dampen market sentiments for LDPE, keeping prices at US$1905/MT in Asia in the week of August 25, 2008. Generally damp market outlook for PE has succeeded in bringing down September offers, with CFR China offers being down adjusted to US$1880-1910/MT. LLDPE Unenthusiastic demand from China continues to dampen market sentiments for LLDPE. Sellers of LLDPE have dropped September shipment offers by over seventy dollars to US$1755/MT in Asia in the week of August 25, 2008. As ethylene costs plummet, while typical LLDPE offers in Asia have retreated, buyers are targeting a price fifty dollars lower. As the gap between buyers bids and sellers offers expands, very few deals were concluded in this "who will relent first" scenario. Polypropylene Lackluster demand from Chinese buyers has exerted pressure on polypropylene markets, stagnating prices at US$1760/MT in Asia in the week of August 25, 2008. Chinese PP market outlook continues to be pessimistic compelling most key suppliers to down adjust September offers. Offers from India and South Korea hovering around US$1750/Mt CFR China levels have met with buyers resistance. General buying interest is pegged about hundred dollars lower. Cheaper cargoes from the Middle East were sold at US$1650/MT CFR CMP levels, while average prices are being gauged uptil lows of US$1700/MT CFR China. PVC Most key sellers have hacked September offers by forty dollars, sinking PVC prices to US$1250/MT in Asia in the week of August 25, 2008. Currently, PVC prices have ebbed to 9 week lows, mainly on bearish demand from China. Few deals were heard concluded as typical FOB offers from South Korea and Japan dropped to US$1230/MT levels, as most Chinese buyers prefer to wait and watch for further price revision in line with falling ethylene values. GPPS Demand for Polystyrene continues to be dismal in Asia, leading to mounting sales pressure that has caused prices to dip. Most CFR China offers for GPPS sank to US$1620/MT in Asia in the week of August 25, 2008, as sellers cut offers in an attempt to liquidate cargoes. Most deals were heard concluded at least twenty to thirty dollars lower on buyer's disinterest. Higher cost pressures did, however, maintain few CFR China offers at US$1680/MT levels. On the supply side, several SM plants across Asia have cutback on operating rates. The recently restarted Styrindo Mono Indonesia's 100,000 tpa SM plant is operating at 80-90% capacity. S.Korea's Lotte-Daesan's 500,000 tpa plant is running at 95% capacity, planned to get trimmed down by an additional 15%. S. Korean YNCC's 285,000 tpa plant is also running at 85% capacity. ABS Unenthusiastic demand from Chinese buyers, as well as falling feedstock SM and butadiene values have pushed down ABS prices in Asia to US$2100/MT in the week of August 25, 2008. ABS producer Cheil Industries is currently operating its 450,000 tpa plant at 80% capacity. Offers were heard at US$2100, but markets have been evaluated at below the 2100 mark.
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