In the week of February 1, 2010- light, sweet crude futures for March dipped to US$72.7, while Brent crude on ICE Futures exchange dipped to US$71.2. Prices have ended the week with a marginal dip as prices have been weighed by persistent doubts over global oil demand recovery amid weaker regional equities at a time when the dollar is strengthening as concerns emerge over China’s monetary policy and banking regulations in USA. Nymex front-month contract has fallen by over ten dollars over the last three weeks.
Naphtha prices in Asia have plunged to almost three month lows as cracks hit their lowest in two months amid pressures from demand cuts triggered by maintenance shutdowns at petrochemical plants. H1-March open-spec naphtha was at US$685/MT CFR Japan in the week of February 1, 2010.
Ethylene prices have spiked to US$1325/MT FOB Korea in the week of February 1, 2010. This brings the spread between ethylene and naphtha to US$620/ton. Some ethylene traders believe that prices will decline from March because of increased supply with the start up of the 800,000 tpa Shell cracker in Singapore that is estimated to export 180,000-200,000 tpa of ethylene. Also, in the past few months, Shell has been buying ethylene to run its MEG plant. When the new plant comes onstream, this will reverse as Shell becomes a significant seller of ethylene. Also the tight supply from Iran is expected to ease in the next few months, as a host of production glitches will be resolved over the next few months, with a great deal of new capacity yet to come on-stream. On the demand side, potential for weaker economic growth in China, resulting in the sharp correction in oil and other commodity prices over the last few weeks could result in bearish trend in prices. The big factor to assess post-Chinese New Year will be the influence of China's reductions in bank lending.
Propylene prices have softened in Asia in the week of February 1, 2010. February outlook on the spot propylene market is mixed at the onset of the Chinese New Year holidays, which will result in much lower trading activities throughout the first half of the month. Although weaker pre-holiday demand from China has resulted in a slight price reduction for prompt spot materials, sellers are generally holding a bullish outlook for H2-February and beginning of March, when buyers returning from the holidays are expected to be in need of replenishing their stocks, amid tight supply outlook on numerous propylene plant shutdowns scheduled in the first quarter
In line falling crude oil and benzene prices, Styrene Monomer (SM) prices have dipped in Asia in the week of February 1, 2010. Spot styrene prices shed $80/ton over a week’s time while most of the decreases have been recorded within the last couple of days. Feedstock benzene firmed to US$950/MT FOB Korea. SM plants continue to operate at 90-95% capacity despite waning downstream demand as the Chinese break for the Lunar New Year Holiday, amid a wave of expected shutdowns at SM units in Taiwan, Japan and South Korea.
The spread between ethylene and naphtha has increased to US$620/ton. Interestingly, despite the inevitable complaints of squeezed margins by PE producers amid market-driven rate cuts and plant-idling, naphtha-based ethylene margins in Northeast Asia rose by US$37/ton due to weaker naphtha prices, as per ICIS. Naphtha costs had fallen by 4.8%, offsetting a 4.6% dip in co-product values. Integrated linear-low density PE (LLDPE) and high-density PE (HDPE) margins also rose by US$30/ton and US$39/ton respectively. Thus, the incentive for integrated producers to increase ethylene sales at the expense of PE didn't seem to be that strong as of last week, despite reports to the contrary. On a non-integrated basis, standalone LDPE margins fell to their lowest level since July 2008 and average January HDPE margins were the worst since September 2004. Ethylene-PE margins have been strong because of temporary supply issues.
HDPE prices have steadied in Asia at US$1345/MT in the week of February 1, 2010. Prices are expected to soften as demand from China starts dwindling at the onset of the two week long Lunar holiday. A supply shortage has been seen in Indonesia of spot PE cargoes, driving spot prices for prompt cargoes sharply higher when compared with the past week. Offers for locally-held HDPE film were heard at US$1440-1700/ton and deals were concluded at US$1445-1635/ton. These sudden increases were attributed to sharply reduced supply inside the country, triggered by a shutdown at a domestic producer, to be accompanied by another domestic shut down at the beginning of next week. Domestic producers have slashed their spot allocations in order to ensure sufficient stock levels to meet their contractual obligations. Producers in Malaysia have announced February offers with further increases from the late January levels, triggered by higher production costs along with limited availability. These elevated offers have not been accepted by the converters, as buyers prefer to defer buying in anticipation of a price correction after the Chinese New Year holidays. Offers for domestic cargoes are currently being reported at US$1387-1425/ton for HDPE film, all on an FD Malaysia, cash equivalent basis.
LDPE prices have steadied at US$1600/MT in Asia in the week of February 1, 2010, amid higher input costs and softening demand from China. Producers in Malaysia have announced their February offers with further increases from late January levels, triggered by higher production costs along with limited availability. Initial February offers were reported with increases of US$115/ton for LDPE film while offers for domestic cargoes are currently being reported at US$1645/MT.
LLDPE prices have steadied at US$1455/MT in Asia in the week of February 1, 2010 amid weakening demand in China and rising costs of ethylene. Buying interest has started to dampen in China as the Lunar New Year Holidays draw closer amid tighter fiscal controls. A shortage of promptly-available PE cargoes has driven up spot and deal prices for domestic LLDPE film cargoes to US$1490-1560/ton FD Indonesia, cash equivalent basis. A sharp reduction in supply due to a shutdown at a domestic producer, along with another domestic shutdown at the beginning of next week has led to reduction in spot allocations to ensure sufficient stock levels to meet their contractual obligations. Players in Malaysia report that domestic producers have announced further increases, triggered by higher production costs along with limited availability. These elevated offers have not been accepted by the converters, as buyers prefer to defer buying in anticipation of a price correction after the Chinese New Year holidays. As compared with January offers, initial February offers were reported with increases of US$40/ton for LLDPE film, while offers for domestic cargoes are currently being reported at US$1530/ton.
Polypropylene prices have stagnated at US$1320/MT in the week of February 1, 2010 in Asia. Markets are lackluster as buyers await a price correction in new February offers from domestic producers and are also cutting back their purchases ahead of the Chinese New Year holidays. Offers to Malaysia from the Middle East were heard at US$1360-1380/MT from the Middle East. Deals were concluded to Malaysia at US$1480 for film grade, US$1510/MT for block co polymer and about 10 dollars higher for random copolymer.
PVC prices have stagnated at US$1015/MT in Asia in the week of February 1, 2010. Deals from Taiwan were concluded at US$$1010-1020/MT for offers pegged about 30-40 dollars higher. PVC demand is expected to recover after the Chinese New Year holiday prompting offers at higher levels amid higher costs and tight supplies. Domestic PVC prices are stable to softer by CNY50-100/ton this week as prices are estimated to follow a downwtrend over the near term as China breaks for its Lunar New Year Holiday.
The prevailing sentiment in the PS market is getting weaker ahead of the approaching Chinese New Year holiday. More buyers show strong resistance towards higher import offer levels, gaining support from softer upstream markets. Spot styrene prices shed $80/ton in the week along with falling crude oil values. Domestic Chinese sellers are eager to offer decreases as they want to speed up their sales ahead of the New Year holiday. Consequently, locally held GPPS prices lost ground by CNY200/ton and HIPS by CNY250/ton to US$1339-1501/ton without VAT and US$1497-1627/ton without VAT. Meanwhile, traders are still firm regarding their offer levels despite the growing stiff resistance from buyers as some of them elected to raise their prices on the back of the higher offer levels they received from their own suppliers. Now, dutiable GPPS prices are at US$1420-1460/ton while HIPS prices are at US$1500-1550/ton on CFR China, cash basis, indicating US$20/ton and US$10-45/ton increases on week over week basis. However, considering the overall poor market sentiment coupled with lower feedstock costs, the PS market in China is expected to follow a softer trend over the near term.
ABS prices have steadied at USUS$1775/MT in Asia in the week of February 1, 2010 amid lackluster demand at the onset of the Lunar New Year Holidays in China.