Impending holiday break slows down petrochemical trading activities in Asia

24-Sep-09
Trading in Asia has significantly slowed, amid price dips as China prepares for its week long National Holidays from 1-8 October. A bearish market outlook indicates to dim prospects of demand recovery when the Chinese return in the second week of October. Polymer demand is expected to slow down in Q4 as export orders have been lower than anticipated and producers have built enough stockpiles with no channel to dispose them off. Petrochemical trading in China has also been impacted on restrained lending by the Central bank in H2-09. Additionally, a supply glut is anticipated from new capacities that will come on stream towards the end of the year, depressing market outlook further. Softening crude oil, naphtha and feedstock prices have sent polymer prices further south. As per ICIS, propylene prices have fallen below the key level of US$1000/ton CFR China for the first time since July due to strong buyer resistance ahead of the holidays. Surplus propylene has been on the rise due to production cutbacks in propylene’s downstream sectors of acrylonitrile, propylene oxide and phenol sectors; in October. Spot deals in Asia’s benzene and toluene markets also declined as most requirements during the holidays had been covered by term contracts. Ample supply dampened regional prices, with discussions in the market focused on material for November and December shipments. Most petrochemical product prices have recovered from the economic downturn in H2-08, primarily driven by China’s demand. Many players opine that this may have been driven by inventory restocking since demand for semi-finished and finished goods continues to be weak. Petrochemical demand is expected to slow month-on-month in the fourth quarter on seasonal and inventory factors. Many companies have built enough stocks when prices were low. Some players may be overflowing with inventory with no outlet to consume them. Too much inventory could restrict demand for petrochemicals in the near future.
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