Price trends of oil, polymer feedstock and commodity polymers in Asia for the week ended August 30, 2010

CRUDE OIL Crude oil prices have risen to hover around US$75 in the week of August 30, 2010 on a pledge by Federal Reserve Chairman to safeguard economic recovery. However, by the end of week, oil prices settled above US$73 on the Nymex. Reports released in USA indicated weak numbers for new home sales and durable goods orders. The markets have chosen to ignore these figures and buy crude based on expectations of growing demand in the medium–term, driven by strong demand from China. This week, OPEC oil output fell to a seven-month low in August, with Iraq leading the drop because of a pipeline bombing. Oil prices are likely to witness a drop in the next week as this week’s macro releases are likely to confirm a trend of slowing growth in USA. NAPHTHA Naphtha prices plummeted during the week of August 30, 2010 to US$658/MT levels. However, prices recovered to end at a week-high level. Open spec naphtha for H1-October settled at US$670/MT. Naphtha cracks have recovered marginally to reach a three-session high despite a well supplied market. A shut arbitrage window caused by stronger prompt European demand and short-covering in Asia are temporarily supporting sentiment, keeping crack spreads above $100/MT for 8 consecutive sessions. On the supply front, India's supplies to the market remain steady at 850,000 tons for September, amid ample supply to come from the Middle East as Gulf suppliers failed to term up all their barrels and explore the spot market for support. A brief lull was seen after around 200,000 tons of purchases for H1-October arrival from YNCC, Honam and LG Chem. Many players believe the market to be overheated with sufficient supply and demand. Hence buyers are not in a rush to conclude deals and have preferred to wait in the sidelines. ETHYLENE Spot ethylene prices in Asia have moved up to US$970/MT FOB Korea in Asia in the week of August 30, 2010 despite the persistent declines in crude oil prices. Additional cracker outages this week leading to a scramble for spot material have propelled ethylene spot prices to a three month high of US$1000/MT in Southeast Asia. The Asian ethylene market has become more bullish this week, as multiple unplanned steam cracker outages in the area tightened the spot market. A fire compelled Sinopec Corp. to shut a furnace at an 800,000 tpa ethylene plant at Qilu, East China for an unknown duration. Japan's Mitsui Chemicals shut its 600,000 tpa naphtha cracker at Chiba due to a mechanical problem - tightening ethylene supplies in the Chiba area, and expected to impact exports. In Singapore, Shell shut its 800,000 tpa naphtha cracker on Tuesday, that was restarted the next day, but continues operating at low run rates. Shell is speculated to step into the market to buy spot ethylene cargoes to maintain high MEG plant operating rates. A recovery in Asian ethylene prices commenced in the middle of the month as end-users actively started seeking spot ethylene cargoes for downstream production, especially for monoethylene glycol amid good margins. Many market players opine that the Asian ethylene market would be capped soon amid quickly-rising spot supplies from the Middle East, especially from Iran. PROPYLENE Lower crude oil prices proved incapable of preventing rising prices in the spot propylene markets. Prices have moved up to US$1195/MT in Asia in the week of August 30, 2010, rising by over 40 dollars in the week on a FOB Korea basis. Prices have risen by a cumulative US$85/MT in the month of August amid growing demand and restricted supplies in the region. EDC In line with mounting ethylene prices, EDC prices have moved up to US$475/MT in Asia in the week of August 30, 2010. Offers continue to be heard at the 500 dollar mark amid healthy downstream PVC market outlook. VCM Amid buoyant input ethylene costs and robust downstream PVC market outlook, VCM prices have climbed to US$795/MT in Asia in the week of August 30, 2010. September shipment CFR China offers have been quoted at the 800 dollar mark in the Far East, and at US$815/MT in the South East region. STYRENE MONOMER Despite weakening crude oil values, spot styrene prices have gained US$15/MT to rise to US$1115/MT FOB Korea in Asia in the week of August 30, 2010. When compared with the beginning of the month, the divergence between spot monomer prices and crude oil futures is even more striking. Crude oil prices have posted steep declines of over US$8/barrel since the start of August, while styrene prices have recorded large cumulative increases since the start of the month of almost forty dollars. Feedstock benzene prices have dipped by ten dollars this week, amid weak oil prices and weakening demand. POLYMERS HDPE HDPE prices have inched up to US$1170/MT in Asia in the week of August 30, 2010 Persistently weakening crude oil prices in the week may hamper Asian and Middle Eastern producers’ efforts to raise prices for September shipment. Weakening oil prices could result in buyer resistance to proposed hikes because regional PE importers typically keep away from the market when crude oil values dip. Most Middle East producers have refrained from announcing September offers this week, as their counterparts in Northeast and Southeast Asia tested the market by offering film grade HDPE at US$1200-1210/MT CFR China for September shipment. These offers have attracted limited buying interest as buyers expect a fall. LDPE LDPE prices have stagnated at US$1335/MT in Asia in the week of August 30, 2010. Few CFR China deals were heard concluded about 10-15 dollars higher, but buying interest remained pegged at the 1300 dollar mark. Asian PE importers typically keep away from the market when crude oil values dip. Asian producers are expected to have fewer difficulties in raising prices for film grade LDPE as supply has been tight in recent months due to planned and unscheduled plant shutdowns in Asia and the Middle East. LLDPE LLDPE prices have inched up to US$1170/MT in Asia in the week of August 30, 2010. CFR China offers have mounted by about 20 dollars. Many Northeast Asian producers have offered film grade at US$1200-1220/MT CFR China for September shipment. However, deals were cited at the low end of the range, mostly unchanged from August transactions. In China, a new Saudi Arabian producer has started to offer LLDPE c4 film for September with large increases of over 100 dollars vs August offers. The producer aims to remain firm, justifying the price hike by pointing to limited allocations. No deals were heard concluded as buyers are showing resistance to these high levels amid lower crude oil values. Reduction of ethylene feedstock from the Ras Laffan Olefins (RLOC) ethane cracker since August has affected supply of LLDPE from Qatar. POLYPROPYLENE PP prices have mounted to US$1265/MT in Asia in the week of August 30, 2010. Tight supplies caused by the regional shutdowns at PP plants have led to large hikes, lifting new offers by US$70/ton in the week. A global producer has started to offer Middle Eastern PP raffia to China this week. September shipment CFR China offers were heard at US$1335/MT levels from South Korea, and US$1275/MT from the Middle East. POLYVINYL CHLORIDE Since most deals for the month have been concluded, PVC prices have steadied at US$955/MT in Asia in the week of August 30, 2010. Some offers have been heard at US$980/MT mark, but have met with buyer resistance. Stronger upstream ethylene and VCM feedstock costs along with higher import prices have contributed to price increases. Demand from both China and India has been strong over the past few weeks. Slightly sagging demand in India is predicted to pick up again over the coming weeks with the end of the monsoon season that will lure additional buyers to return to the market to replenish their stocks. POLYSTYRENE Polystyrene prices dipped in Asia as buyers who had returned last week to restock, have elected to step back. Buyers anticipate a price correction amid weakening crude oil and benzene prices. GPPS prices have slipped to US$1245/MT in Asia on reduced demand from China. ABS ABS prices have dipped to US$1940/MT in Asia in the week of August 30, 2010 on weak buying sentiments, particularly from China.