Buyers in SE Asia anticipate competitive prices in February

13-Jan-10

2010 has brought significant polymer price increases in SE Asia amid robust demand and outlook in China and strong upstream costs. Several buyers in the region were disappointed by the rising trend as they had hoped to see lower domestic prices for 2010 with the implementation of the ASEAN-6 free trade agreement with easing of trade barriers both within the region and with China. As per Chemorbis, converters in SE Asia who had procured cargoes in late December in anticipation of a price hike in January, currently operating with a few weeks stock say that they are hoping to see more competitive offers towards the end of month and beyond as demand from China is anticipated to slow down as production slows ahead of the Chinese New year holidays. Several SE Asian players who had restrained from buying in the latter part of 2009 had returned to the markets in late December to engage in pre-buying in anticipation that the new year would get off to a bullish start. Several factors supported their expectations of higher prices in January including tight supplies throughout the region, higher upstream costs and preparations for the Chinese New Year. With the Chinese New Year holidays a month away, packaging and disposable product manufacturers often see seasonal improvements in their business, expected to slow down ahead of the break. In addition, a number of traders in both China and Southeast Asia have expressed concern that the current rally in China’s polymer markets is a temporary phenomenon driven mostly by speculation and unsupported by end product demand. These traders note that distributors in China’s local markets are already showing some willingness to concede to discounts to conclude sales, despite of efforts by major Chinese producers to maintain firm market sentiment by announcing consecutive price increases. Several converters are predicting that the current strong regional trends, while likely to remain in place until the end of the current month, will ultimately change direction once February begins and trading activity slows down during the Chinese New Year celebrations. Following the Chinese New Year holidays, most converters are predicting either a stable trend along with a greater propensity for sellers to offer discounts in the case of firm bids.