Price trends of oil, polymer feedstock and commodity polymers in Asia for the week of October 20, 2008

CRUDE OIL Crude oil futures have fallen to hover above US$70/barrel during the week of October 20, 2008. A 7.5% drop in oil prices this week has been caused by rising inventories in USA and deteriorating global fuel demand. In the past 4 weeks, fuel demand in USA has ebbed to its lowest level since July 1999. Oil ended the week a notch higher as New York's main contract, light sweet crude for November delivery rose by over a dollar to almost US$73. This one dollar rise was triggered by concerns about OPEC's possible plans to announce production cuts at a special meeting in Vienna this week. OPEC members, who pump about 40% of the world's oil, seem keen to reduce output in a bid to prop prices, as crude prices have crashed to half since July. NAPHTHA In line with falling oil values, naphtha prices in Asia have dropped by a further US$100 in the week of October 20, 2008. Open-spec naphtha prices for H1-December delivery closed at US$465/MT CNF Japan. Naphtha prices in Asia have dropped by over 50% since early August. Derivative demand is expected to decline further as the financial crisis in US and Europe fuels fears of a global recession- impacting export volumes of Asian processors. This in turn will lead to naphtha demand in the region getting limper. ETHYLENE Ethylene prices in Asia have plunged to US$700/MT in the week of October 20, 2008. Lackluster demand has pressured ethylene prices down by eighty dollars this week. Even at such low levels, very few deals have been concluded as buyers wait for yet another price correction. Weak derivative demand and persistently plunging naphtha and oil prices increase prospects of a further deterioration in polyolefin prices. Derivative demand is expected to decline further as the financial crisis in US and Europe fuels fears of a global recession- impacting export volumes of Asian processors. PROPYLENE Propylene prices in Asia have dropped to US$645/MT in Asia in the week of October 20, 2008. Producers of PP, ACN and phenol have drastically lowered their buy of feedstock propylene. This lackluster downstream buying has triggered a massive dive in propylene prices. Even as CFR China offers have tanked to US$700/MT, buying interest fails to get revived amid persistently weak demand and sluggish market outlook. But this does not seem to be the end of woes for Asian players, as they fortify themselves for more drastic price drops as naphtha plummets for the fourth straight week. Additional cuts in run rates being mulled by Asian crackers due to feeble derivative demand. South Korea's SK Energy plans to shutter by end of month, its 140,000 tpa No.1 cracker along with Lotte Daesan, KPIC. STYRENE MONOMER Styrene Monomer prices sunk to US$850/MT in Asia in the week of October 20, 2008 in line with deteriorating ethylene and benzene values. Benzene prices in Asia fell last week by more than US$150/MT following another plunge in crude oil values. Non-integrated SM producers are trying to maintain production and sales in balance with 80% benzene and 20% ethylene, plus a per ton processing cost of US$150. But problems are arising for those producers who had SM inventories on hand, sourced previously at a much higher rate. Benzene prices have ebbed to over 30 month lows on worries of dampening market outlook in the wake of the inevitable global economic recession causing a situation of oversupply and persistently subdued downstream demand. Hence, key benzene maker SK Energy Corp plans a shut down at its No.1 naphtha cracker at Daesan by end of month or early next month. VCM Lackluster buying and weak downstream demand in the region, particularly from China has pulled down VCM prices to US$675/MT in Asia in the week of October 20, 2008. Even at these reduced levels, very few deals were heard concluded, with buying interest being quoted about fifty dollars lower. EDC Deteriorating demand from downstream derivative markets of PVC and VCM as well as sinking feedstock ethylene values has kept EDC market outlook pessimistic at US$280/MT in Asia in the week of October 20, 2008. Few deals for next half shipment were heard concluded at the 300 dollar mark, but recent buying interest is being quoted about fifty dollars lower. POLYMERS HDPE Lackluster demand and bearish market sentiments have dragged down HDPE prices by almost 200 dollars in Asia to US$1200/MT in the week of October 20, 2008. Despite benchmark offers plunging, buying interest failed to revive. As feedstock ethylene prices sink further, in anticipation of one more price revision, buyers seem interested in procuring material at US$1100/MT CFR. LDPE The week of October 20, 2008 witnessed a 200 dollar plunge in LDPE prices to US$1350/MT in Asia on unenthusiastic buying and subdued demand. Seller's offers plunged from US$1550 to US$1400/MT CFR China. But buying interest tanked by a further hundred dollars. The financial bail-out packages announced in USA fail to have major impact on sentiments in Asia unless it translates into an increase in demand in the US, a key export market for Asian processors. LLDPE Dismal demand has pulled down LLDPE prices to US$1250/MT in Asia in the week of October 20, 2008. Despite lowered offers, bearish sentiments prevail in the market as buyers prefer to wait in the sidelines for further price correction in line with plunging input costs. POLYPROPYLENE As buyers abstain from concluding deals, polypropylene price in Asia have fallen to US$1150/MT in the week of October 20, 2008. Few October deals for South Korean material were heard concluded at US$1200/MT CFR China, post-which, offers were down revised. Despite this downward revision, reluctance has been seen among most buyers from China for fresh cargoes above US$1100/MT CFR CMP due to availability of lower priced offers from domestic bonded warehouse market. PVC Polyvinyl Chloride prices have dipped to US$880/MT in Asia in the week of October 21, 2008, on persistently deteriorating demand, particularly from China. Buyers prefer to wait and watch in anticipation of yet another price dip. Few deals were heard concluded at these levels, but quantities were very small. Offers for carbide based PVC from Chinese producers were heard at US$830/MT FOB CMP. GPPS Polystyrene prices in Asia have headed further south by hundred dollars along with falling feedstock SM and benzene values, as most buyers prefer to wait in the sidelines. Benchmark CFR China offers for GPPS have dropped to range at lows of US$1250-1300/MT, but continue to be met with dampened buying interest pegged at least fifty dollars lower as feedstock Styrene Monomer prices dipped to below US$850/MT mark. A further 25-30% reduction in run rates has been made by many polystyrene producers in Asia, while the South Korean producers are maintaining a 50% run rate- due to diminishing downstream demand. ABS ABS prices have fallen to US$1830/MT in Asia in the week of October 20, 2008 on persistent weak buying sentiments triggered by sinking feedstock costs. Despite lowered offers, buyers scout for offers about 20-30 dollars lower. A sudden maintenance outage has shuttered the 90,000 tpa ABS plant of Taiwan's GPPC for about one more week. A two month maintenance shutdown has been announced by Thai company IRPC at its 96,000 tpa ABS plant.