In the week of July 5, 2010, crude oil futures have fallen to US$72 levels, dropping for the fifth consecutive day on growing concerns as economic data continues to indicate a stalling economic recovery. Oil prices continue to fall, topping their steepest weekly decline since early May on investor concerns that global economic growth could slow in H2-10 and drag crude demand down with it. Data from US government reports showed that employment levels slipped in June for the first time in 2010, disappointing figures on manufacturing, home sales and construction, adding pressure to a market already edgy over an apparent slowdown in growth in China.
Corresponding with deteriorating crude oil values, naphtha prices in Asia have plummeted to US$620/MT CFR Japan in the week of July 5, 2010. The already damp Asian markets could witness further deterioration in market outlook and sentiments with a supply glut from the Middle East. Almost 700,000 tons of spot naphtha for July-August loading will be exported by 4 major Middle East producers (Saudi Aramco, Tasweeq, Adnoc, KPC) at a time when naphtha demand has been affected by sluggish buying interest from China. There may be no shipments of naphtha from Europe to Asia in July, akin to the supply scenario in March 2010, as demand from Chinese producers slows. Naphtha imports have fallen in China as pace of economic growth slows down. Additionally, naphtha production in Asia and the Middle East has risen as refiners resumed operations after maintenance shutdown.
Ethylene prices have collapsed by almost 50 dollars to US$855/MT in Asia in the week of July 5, 2010, amid dual influence of lackluster demand and deteriorating crude oil values. A steep decline in Asian ethylene margins seems to have been largely triggered by the perturbing state of China's polyethylene (PE) market amid a supply glut in the region - PE operating rates have been reduced in Saudi Arabia, resulting in increased availability of merchant ethylene, while surplus material is available from Shell Chemicals complex in Singapore with the commissioning of the 800,000 tpa steam cracker.
Propylene prices have tumbled to US$1015/MT in Asia in the week of July 5, 2010-plunging by over 60 dollars in line with deteriorating crude oil and naphtha in a market devoid of any optimism.
As oil, naphtha and ethylene collapse, EDC prices have softened amid stability in downstream PVC demand to US$440/MT in Asia in the week of July 5, 2010. Offers continue to be heard at US$450-460/MT levels amid subdued demand even as downstream PVC sellers are reporting better demand in Asia for July.
VCM prices have dipped to US$750/MT in Asia in the week of July 5, 2010 amid declining feedstock costs. Lackluster demand continues to keep July CFR China offer levels below US$760/MT.
Styrene Monomer prices have fallen in line with plunging input costs to US$975/MT in Asia in the week of July 5, 2010. Offers were heard at US$980/MT FOB Korea levels, but lackluster buying interest has kept bids at US$955-960/MT levels. Feedstock benzene prices have slipped by almost 20 dollars to US$780/MT in Asia.
Amid the recent plunge in upstream values, one of the main factors contributing to the steep losses seen in Asia’s PE markets last month has been oversupply concerns, fueled by the imminent start-up of new capacities in Asia and the Middle East and slow buying as Chinese traders attempt to hive off excess stock levels. This month traders are reporting an easing out of inventory amid new start ups, particularly after the recent start-up of Sinopec Zhenhai’s new 450,000 tpa HDPE/LLDPE swing plant in China. News of some recent plant shutdowns in Iran have provided temporary relief to the market’s supply woes. Also Exxon Mobil Corp.’s polyethylene supply from Singapore has been affected due to an outage – while the upstream 900,000 tpa naphtha cracker at the site continues to run, operational issues have shut down the 600,000 tpa polyethylene (PE) and 405,000 tpa polypropylene (PP) plant. This could lend support to prices. However, players are still concerned about the possibility of attractive deep-sea offers from the US entering the Asian market in large volumes, as softer ethylene prices in the US make it possible for American PE sellers to enter the global markets with very competitive prices.
HDPE price have plunged to US$1075/MT in Asia in the week of July 5, 2010 in line with deteriorating feedstock costs amid lackluster markets. CFR China offers from SE Asia have been heard at the eleven hundred dollar mark, while offers from Taiwan have been heard about 50 dollars higher. But Middle Eastern CFR China offers that are priced lower at US$1050/MT amid lackluster market sentiments and outlook have kept buyers reluctant to trade at current levels.
LDPE prices have fallen to US$1305/MT in Asia in the week of July 5, 2010 as buying remains dull and outlook remains bearish. Though CFR China offers have been heard at the 1300 dollar mark, reluctance on part of the buyers has kept bids pegged fifty dollars lower.
Falling to US$1135/MT levels, LLDPE markets remain subdued amid weaker upstream costs and dull demand in Asia in the week of July 5, 2010. Few CFR China deals were concluded at US$1155-1160/MT levels from South Korea, but buyers’ reluctance has pulled down bids to the 1100 dollar mark.
Asian PP prices have dropped on lackluster demand from China to US$1175/MT in Asia in the week of July 5, 2010. Though July shipment CFR China offers from South Korea have been hovering around US$1225/MT, buyers remain reluctant to conclude deals in anticipation of a price correction as deals for Middle East cargoes have been done at US$1175/MT levels.
PVC prices have steadied at US$895/MT in Asia in the week of July 5, 2010. Despite worries about the health of the global economy and a slackening of real estate market in China, Asian PVC sellers are reporting better demand for July, as buyers replenish their stocks after drastically reducing their purchases in both May and June. Buyers’ willingness to buy has been aided by sellers’ willingness to concede to large decreases on their July offer levels. July shipment CFR China offers have been heard at US$925-945/MT levels, with deals concluded about 50-60 dollars lower.
Deteriorating prices of crude oil and styrene monomer have taken a toll on polystyrene markets of Asia in the week of July 5, 2010. Most sellers pegged CFR China offers for GPPS at US$1175-1185/MT levels, but deals remained unconcluded as buying intentions persisted about 20-30 dollars lower. HIPS prices have fallen to US$1235-1245/MT levels.
ABS prices continue to fall to US$1800/MT, in line with falling upstream costs and deteriorating demand. Very few deals were concluded as sellers’ offers continue to hover below US$1885/MT while buying interest remains 60 dollars lower.