Banking woes in USA could trigger a downfall in economy: polymer prices in Asia plunge in anticipation of weak demand for Chinese products

17-Sep-08

Crude oil prices have plunged below hundred dollars to US$95 per barrel on Monday. Lehman Brothers Holdings filed for Chapter 11 Bankruptcy protection in a New York federal court early Monday, listing $613 billion in debt to more than 100,000 creditors and US$639 billion in assets. PE and PP prices in Asia have plunged as crude oil prices have crashed in the wake of mayhem in the US banking sector, raising concerns of a further slowing global economy. A large proportion of China's output finds its way into American markets. Depressing global financial outlook has raised concerns that demand for plastic end-products could fall, leading to factory closures in China- the leading supplier of these products to USA. Polypropylene prices in Asia have reached their lowest level in nine months as buyers and sellers reached a deadlock over prices. CFR FE Asia prices for raffia and injection grades have ebbed to US$1500/MT, despite which demand remains conspicuous by its absence. Few deals were concluded in markets of SE Asia because of demand from local markets. Despite stockpiling, producers from South Korea prefer to persevere at US$1550/MT in anticipation of a demand revival post October holidays in China. Ebbing to the lowest levels in the entire year, Polyethylene prices in FE Asia have Dipped to US$1575/MT. Marginal deals are being concluded at these levels, as the players prefer to wait and watch market movement. Interestingly, crude prices have dipped below the hundred dollar mark, it is very difficult for market players to assess whether prices have bottomed out and their subsequent change.