In the week of November 22, 2010, New York's main contract, light sweet crude for delivery in December fell to $US81.5 per barrel, while Brent North Sea crude dipped to $US84.3 in London. Oil prices have dropped towards end of the week on anticipation that China's latest move to curb soaring inflation raised concerns over a global economic slowdown. China's central bank has announced plans to raise the amount of money that lenders must keep in reserve as the world's second-largest economy struggles to tackle soaring inflation and housing costs. The reserve ratio would be raised by 50 basis points, effective November 29, in the fifth hike this year and the second this month.
Weakening crude oil prices have pulled down naphtha prices in Asia in the week of November 22, 2010. The hike in naphtha prices also paused on news that Formosa Petrochemical could delay delivery of 100,000-120,000 tons of naphtha to January from December, due to delayed start up of its 1.03 mln tpa No 2 naphtha cracker in Mailiao after a regular turnaround. Open-spec naphtha for December dipped to US$800/mt CFR Japan. Almost 600,000 tons of deep-sea naphtha supply is on its way to Asia from Europe in December and January, because the recent run-up in prices helped to make arbitrage economics workable. Last week, the European naphtha cargo market traded in a range of US$760-790/ton CIF NWE vs US$796-806/ton CFR Japan in Asia. Naphtha demand from end users continues to be strong in Asia - Unipec is seeking 150,000 tons of spot naphtha for delivery in H1-December. Honam Petrochemical has procured 100,000 tons of spot naphtha for delivery in H2-December.
As supplies from the Middle East have shrunk, ethylene prices have increased to US$985/MT in Asia in the week of November 22, 2010. Buyers who had been waiting in the sidelines in anticipation of a price correction returned to the markets as prices firmed up.
Subdued demand has pulled down propylene prices to US$1205/MT in Asia in the week of November 22, 2010. Demand has weakened, as apart from the reserve requirement change in China, crude oil prices began to move down, further denting speculation in the plastics sector. The resultant bearish sentiments in the Chinese market affected overall trade flow and led to price declines.
In line with falling crude oil values and bearish sentiments in downstream Chinese markets, EDC prices have dropped to US$560/MT in Asia in the week of November 22, 2010.
Despite weakening markets, VCM prices have moved up to US$910/MT in Asia in the week of November 22, 2010 amid limited avails. Seller's offers for December shipment were heard at US$940-950/MT while the market was assessed at US$910/MT.
Styrene monomer prices have moved south to US$1230/MT in Asia in the week of November 22, 2010 amid deteriorating demand and falling benzene values. Few FOB Korea deals were heard concluded below US$1230/MT. Amid weak demand and falling crude oil values, benzene prices tanked to US$925/MT.
The Chinese government’s decision to raise reserve requirements at the country’s banks to fight inflation, immediately deflated some of the speculative enthusiasm seen at the start of the month. As per Chemorbis, this enthusiasm had led to price hikes as players speculated about seeing higher prices in the near future because of inflation and the falling US dollar after the US Fed took a path of “quantitative easing”. A simultaneous fall in crude oil prices further dented speculation in the plastics sector. The resultant bearish sentiment in the Chinese market has impacted overall trade flow leading to price declines. Speculators will now have to weigh several factors encompassing further steps the government may take to tighten liquidity and stem inflation, including an interest rate hike and potentially limiting prices of commodities as hinted necessary by the government, against the potential for profit from rising inflation due to an influx of fresh dollars due to the Fed’s policies and a strengthening yuan against the US dollar. Power rationing in the country and efforts to increase diesel supplies have boosted naphtha prices.
Weakening domestic prices amid lackluster demand and bearish sentiments in China have pulled down HDPE prices to US$1265/MT in Asia in the week of November 22, 2010. Chinese producers have been forced to take back some of their massive increases announced since the beginning of the month.
LDPE prices have dipped to US$1610/MT in Asia in the week of November 22, 2010, amid dull demand and bearish sentiments in China. December shipment CFR China offers were heard at US$1650-1660/MT but very few deals were concluded as most buyers preferred to wait in the sidelines amid lifeless markets.
On sudden withdrawal of buying intentions in China, LLDPE prices tanked by over 50 dollars to US$1375/MT in Asia in the week of November 22, 2010. CFR China offers have been heard at the 1400 dollar mark, while buying intentions remain pegged about fifty dollars lower.
Amid limp markets and pessimistic market outlook, PP prices have dipped to US$1410/MT in Asia in the week of November 22, 2010. Most offers for December shipment were heard at US$1455-1500/MT, but markets await deal conclusion. Chinese producers have been forced to take back some of their previous massive increases by reducing their PP prices by US$30-70/ton.
PVC prices have stabilised at US$1015/MT in Asia in the week of November 22, 2010. Amid weakening demand, the market was protected by tight supplies as power rationing has affected PVC output as well as ability to transport material around the country. December shipment CFR China PVC offers were heard at US$1025-1040/MT.
Amid restrained demand in China, Polystyrene prices have fallen to US$1375/MT in Asia in the week of November 22, 2010. However, the decline has been limited due to the tight margins. Most CFR China offers for GPPS stood at US$1450/MT against buying intentions about 100 dollars lower.
Amid deteriorating demand from China and high offers from sellers, ABS prices have stagnated at US$2120/MT in Asia in the week of November 22, 2010. CFR China offers from South Korea and Taiwan have been heard at US$2175-2200/MT levels, but deals await conclusion as Chinese buyers prefer to wait in the sidelines.