In the week of May 24, 2010, crude oil prices have strained to keep above the US$70 mark amid high oil inventories and persistent concerns over Europe's debt problems. The market is abound with fears that deep government spending cuts in Greece, Spain, Italy and Portugal to fend off a debt default will hurt economic growth in Europe. Total US crude inventories have been rising and stocks at the delivery hub for US futures contracts in Cushing are at a record high. Adding to this is tensions between South Korea and North Korea over the sinking of a navy ship along with fresh concerns from China. On the supply side, oil markets remain well supplied with the Organization of the Petroleum Exporting Countries pumping about 2 mln bpd. OPEC officials have not yet called for any steps to sustain prices and have not called for any meetings until its meet in October.
Buckling under pressure from plunging crude oil values, naphtha prices have seen a quantum dip in Asia in the week of May 24, 2010. Open-spec naphtha for H2-June delivery shrunk by over 80 dollars to US$655/MT FOB Korea, falling to its lowest in over seven months. Naphtha cracks plunged to 6 week lows, weighed down by high supplies. The downward movement in oil prices was followed by the Asian naphtha market, where prices have lost about US$135/ton since the beginning of May.
Ethylene prices have nose dived to US$1105/MT in Asia in the week of May 24, 2010 under the strain of collapsing crude oil and naphtha values and deteriorating downstream market sentiments and outlook. Despite shrunken ethylene values, buying interest has failed to pick up. Buyers are uncertain about the trend that markets will follow and hence prefer to wait and watch. Sellers offers progressively dipped lower in a bid to attract interest, but buyers preferred to wait in the sidelines due to uncertainty over market outlook on news of credit tightening measures in China and worries about concerns caused by Europe’s debt crisis. Lackluster demand could continue to exert pressure on olefins values, despite tight supply amid ongoing cracker turnarounds in the region.
Propylene values have tanked to US$1140/MT in Asia in the week of May 24, 2010 under pressure from fallen crude oil and naphtha values. Spot propylene prices in Asia have plunged by over US$180/ton since the start of May, with US$130/ton of the total decrease coming over the past one week. Demand continues to be bearish and outlook uncertain. Despite lowered offers to attract interest, buyers preferred to wait and watch due to uncertainty over market outlook on news of credit tightening measures in China and worries about concerns caused by Europe’s debt crisis. Lackluster demand could continue to exert pressure on olefins values, despite tight supply amid ongoing cracker turnarounds in the region.
Falling upstream costs coupled with worsening derivative markets have taken a toll on EDC markets. EDC prices have fallen to US$535/MT in Asia in the week of May 24, 2010.
VCM prices have steadied at US$860/MT in Asia in the week of May 24, 2010. Reduced offers from sellers have resulted in lack of conclusion of a substantial number of deals.
Styrene Monomer prices have tumbled to US$1075/MT in Asia in the week of May 24, 2010 on falling crude and benzene values amid dull demand from derivative markets. Despite weakened price levels, buying interest has been dull. Feedstock benzene prices have toppled by about US$130 to hover above the 800 dollar mark.
By the middle of the week of May 24, 2010, sellers began to reveal their sell ideas for PE products to Southeast Asia with decreases for June, in line with expectations. Amid falling crude oil prices, Asian petrochemical prices have plunged partly due to destocking activities. The declines are likely to continue due to high inventory levels amid lackluster market sentiments. Concerns are mounting in Asia over Europe’s debt crisis that has resulted in austerity measures, which could continue, threatening to restrict exports from Asia to Europe. These worries brought demand to a standstill. High levels of inventory abound in the polyethylene market with PetroChina and Sinopec currently holding a total of 750,000 tons. Fearing a repeat of the 2008 crisis scenario, when polyolefin prices had a US$100-200/ton weekly decline, traders are currently rushing to liquidate cargoes (mostly of Middle East origin), even at a loss.
HDPE prices have fallen below US$1200/MT in Asia in the week of May 24, 2010 amid lackluster demand and bearish market outlook. Despite offers at such low offers, demand continues to be subdued, and deal conclusion has been sporadic. Iranian film-grade is being offered by Chinese sellers at US$1170-1180/ton CFR China for prompt lifting at the bonded warehouse. Offers for Southeast Asian origins were also lower by US$40-50/ton. Buy interest has been reported even lower, showing a gap between buyers interest and sellers offers. Buy idea for HDPE film has been heard US$180-200/ton below the new prices for Southeast Asian origin material.
LDPE prices have fallen below US$1400/MT in Asia in the week of May 24, 2010 as markets await deal conclusion amid slothful buying interest. For LDPE film, a Middle East offer was received with an US$80/ton decrease and from Indonesia, the decrease amount on a sell idea was at $50/ton. A trader, meanwhile, gave a sell idea for Iranian origin which was US$20-50/ton lower for materials sitting in their bonded warehouse in China as demand is rather slow both in China and Southeast Asia. Traders prefer to deplete inventories instead of buying any more material.
LLDPE prices have fallen to US$1285/MT in Asia in the week of May 24, 2010 as the markets await deal conclusion. For LLDPE film, sell ideas and offers were down US$40-70/ton, and down US$70-100/ton for sell ideas to India. A trader offering Iranian origin reduced his sell idea by US$40-70/ton, while Middle Eastern producers decreased prices by US$50-60/ton, and from Indonesia a sell idea was down US$70/ton. Producers are not under too much pressure to sell LLDPE because of limited inventory, but the market sentiment continues to be bearish.
Polypropylene prices have fallen below US$1300/MT in Asia in the week of May 24, 2010 amid weak demand and falling propylene values. The lackluster sentiments and pessimistic outlook have been triggered by sharply lower oil prices, amid concerns of Europe's sovereign debt crisis, its contagion, especially to the US banking system, that has raised concerns of a repeat of the global recession of 2008-2009. These worries brought demand to a standstill. Uncertain global consumer confidence is expected to erode factory orders for finished goods made in Asia, leading to a lull in demand, prompting destocking amongst buyers. As PP is the largest derivative sector for propylene, a prolonged squeeze on PP margins has the potential to spark a fresh round of production cuts, and a price slash was imminent to prevent propylene stocks from building too quickly.
Amid weak demand, polyvinyl chloride prices have plunged to US$985/MT. Offers from Japan, Taiwan, South Korea have been heard at US$1020/MT for next month shipment. However, offers have been reduced on weak demand from China and on deep sea cargoes that were offered at below the US$1000/MT mark for June/July shipment by a North American producer.
In the week of May 24, 2010, polystyrene prices have tanked with falling upstream costs and dull demand. Offers for GPPS grade fell to US$1360/MT, but buyer’s hesitation in anticipation of a further price correction has tanked prices. June shipment CFR China offers for GPPS were evaluated at US$1325/MT, and at US$1445/MT for HIPS.
ABS prices have fallen to US$1925/MT in Asia in the week of May 24, 2010 as demand continues to be dull, particularly from China.