Price trends of oil, polymer feedstock and commodity polymers in Asia for the week of October 13, 2008

CRUDE OIL Crude oil for November delivery fell by 10% to US$77.70 a barrel on the New York Mercantile Exchange, the lowest settlement since Sept. 10, 2007. Brent crude oil for November settlement also dipped by 10% to settle at US$74 a barrel on London's ICE Futures Europe exchange, the lowest settlement since Sept. 4, 2007. Crude has fallen to its lowest level in more than a year, on weaker demand in the United States and elsewhere, as well on investors' fears of a possible recession. NAPHTHA In line with deteriorating oil prices and pessimistic market outlook, naphtha prices in Asia have also had a drastic fall of almost 150 dollars in the week of October 13, 2008. Open-spec naphtha values for H2-November delivery closed just below US$600/mt CNF Japan. Taiwan's Formosa plans to reduce operating rates at three of its naphtha crackers, through maintenance shutdowns, as the global economic slowdown pulls down demand and takes its toll on production margins. The crackers to be affected are the 700,000 tpa No.1 unit, the 900,000 tpa No. 2 and the 1.2 mln tpa No. 3 cracker. Run rates at Formosa's No. 1 cracker, that had been reduced by 10% in September, saw a further 10% reduction this month. Taiwan's CPC Corp has deferred restart of its naphtha unit for the third time last week. Korea Petrochemical Industry Co (KPIC) plans to reduce run rates to 90% at its 460,000 tpa cracker. SK Energy will run its No.1 unit at 70-80% rate. Yeochun Naphtha Cracking Centre (YNCC), which operates three crackers with a combined capacity of 1.8 million tpa, will cut overall rates by an additional 5% to 20%, from the earlier cutbacks of 15%. ETHYLENE Ethylene prices have caved in by over 200 dollars in Asia in the week of October 13, 2008. After conclusion of a few deals around US$900, buying interest has waned to hover around US$790/MT CFR Asia in line with plummeting naphtha prices. As naphtha prices nose dived below US$600 and downstream demand failed improve, traders in the continent who are laden with surplus cargoes tried to out-sell each other. Despite such low pricing, demand from buyers has not picked up as they are beset with problems of dampened buying due to sharp global slowdown. Another problem facing ethylene producers is shrinking demand in the next quarter caused by a cutback in operating capacities by downstream MEG and styrene producers due to volatile input costs and weakening demand that is exerting cost pressures. PROPYLENE Deficient downstream demand in Asia coupled with mounting inventories have been responsible for pulling down propylene prices by over US$150 to US$900/MT FOB Korea. Buying interest continues to wane as players prefer to wait and watch for yet another price dip in line with plummeting feedstock naphtha prices that sunk lower than US$600/MT. VCM A persistent fall has been witnessed in CFR FE VCM prices to US$700/MT in Asia in the week of October 13, 2008, in line with falling input values, restrained demand from China and declining downstream PVC market sentiments. VCM demand continues to wane and markets remain still as several PVC producers in the continent have reduced operating rates in a bid to dispose of stockpiles. EDC Lackluster downstream demand and sinking ethylene values have pulled EDC prices down to US$300/MT in Asia in the week of October 13, 2008. Demand continues to be subdued despite price cuts because of reluctance on part of buyers to conclude deals in anticipation of a further price revision in line with deteriorating downstream VCM and PVC and upstream ethylene prices. STYRENE MONOMER Styrene Monomer prices have come tumbling down in Asia to US$1000/MT in the week of October 13, 2008. Lackluster demand has pulled down prices by over 300 dollars this week. Very few deals are being closed at this price, as buyers prefer to wait and watch for a further price correction, and currently sellers are unwilling to lower offers. Feedstock benzene prices have tanked to US$800/MT FOB Korea in line with plummeting oil and naphtha values. POLYMERS HDPE Plunging ethylene values have pulled down HDPE prices in Asia to US$1395/MT in the week of October 13, 2008. Despite a reduction in CFR China offers to US$1410/MT, buyers seem unwilling to procure material, expressing an intent to buy about 40-50 dollars lower. As listlessness persists in buyer sentiments in the continent, prices are expected to cave in further. LDPE Feeble demand from China coupled with declining upstream markets, have pulled down LDPE prices in Asia to US$1550/MT in the week of October 13, 2008. October offers from Malaysia have been heard at US$1500/MT CFR China and from South Korea at US$1550/MT CFR China. Despite such low pricing, demand from buyers has not picked up as they are beset with problems of dampened buying due to sharp global slowdown. LLDPE Dismal demand from China and deteriorating ethylene values has knocked down LLDPE prices to US$1400/MT in Asia in the week of October 13, 2008. Despite falling prices, demand has failed to revive, as buyers are they are plagued with problems of dampened buying due to sharp global slowdown. Polypropylene Polypropylene prices in Asia have sunk to US$1240/MT in the week of October 13, 2008. PP demand that had come to a standstill before the week long Chinese national holidays, has failed to take off. PP market outlook continues to be pessimistic due to listless demand from China. Typical CFR China offers from South Korea, India and Saudi Arabia that have fallen to hover around US$1250-1300/MT, have failed to revive buying. Chinese seem to be interested in procuring material at lows of US$1200. Meanwhile, feedstock propylene prices have fallen below the thousand dollar mark in line with deteriorating oil and naphtha values, and weak downstream demand. PVC Unenthusiastic buying and lack of deal conclusion has kept outlook for PVC markets pessimistic in Asia in the week of October 13, 2008. Sellers, who have reduced CFR China offers for October shipment to US$920/MT, are encountering a further decline of twenty dollars in buying intentions. Not under any pressures to buy amid slowing global demand, most buyers prefer to wait and watch for yet another price correction triggered by deteriorating demand from China, as well as falling feedstock values. Chinese suppliers have revised offers to US$870/MT FOB CMP, as the domestic PVC market of China continues to abate and typical dealing prices slide marginally. GPPS Lackluster demand has pulled down feedstock SM prices by over 200 dollars this week, compelling Polystyrene offers for October to reduce by almost 70-80 dollars. GPPS offers have dipped to US$1430/MT CFR China, even as buying interest has been evaluated at US$1400/MT in the week of October 13, 2008. Very few deals have been heard concluded across the continent as buyers prefer to wait and watch in anticipation of a further price correction in line with plummeting input costs. ABS As feedstock SM, ACN, butadiene prices continue to fall, they have brought down downstream ABS prices. CFR China ABS prices have dipped to US$1900 even as most sellers have quoted offers for October shipment at US$1930-1950/MT. A chunk of buyers from China prefer to wait and watch for yet another price correction in line with feedstock SM prices that have tanked by two hundred dollars. Butadiene prices are also being estimated to fall further by almost US$500 if crude oil and naphtha prices continue to decline and weak demand persists in the wake of US financial crisis and the inevitable recession in Europe.