Asian spot monomers weaken on drop in crude oil, slowing demand at the onset of Chinese holidays

09-Feb-10

Spot prices for most monomers are retreating in Asia in the final week before the Chinese New Year holidays, due to the holiday lull in Asian demand as well as softening crude oil prices. As per Chemorbis, after briefly rising above US$77/barrel earlier last week, crude oil futures on the NYMEX were at US$71.19/barrel on February 5, a drop of slightly more than six dollars in just three days, plunging oil futures to their lowest point since December 2009. This drop can be attributed mainly to a possible sovereign credit crisis in European states such as Greece and Spain, and weaker US equity markets following the US Labor Department’s announcement of disappointing employment figures for Q4-2009. In line with crude oil futures, spot naphtha prices fell by US$31/ton on the final trading day of the past week to reach US$677/ton CFR Japan. Spot ethylene prices, which had been tracking a firm trend since mid-January despite sluggish PE demand, lost US$30/ton over the course of the past week as sellers elected to reduce their offer levels in the face of weak demand from key markets such as China and Taiwan. Spot propylene prices, which had been hovering at high levels since mid-January in defiance of lackluster PP demand, also began moving back towards their early year levels, shedding US$20/ton on the week. Lack of buying interest in the region along with discouraging global economic news has been weighing down the market. In the VCM market, major Japanese producers have lowered their February offers by US$20/ton from their initial targets, although buyers are said to be holding out for additional discounts. Bearish market sentiment in China’s domestic PVC market due to the pre-holiday drop off in demand was also cited as a factor supporting the downward drift in prices. Spot styrene prices in Asia also began to show some weakness towards the end of last week, shedding ten dollars per ton on the final trading day of the week as lower crude oil prices and higher than normal inventory levels inside China drove buyers to the sidelines.