Asian MEK prices to weaken on high stocks, poor demand

04 April 2005 03:25  [Source: ICIS news]

SINGAPORE (CNI)--Methyl ethyl ketone (MEK) prices in Asia are expected to weaken further in April as high stock levels and poor downstream demand from the paints and coatings sector hurt demand for imports, market sources told CNI.

MEK prices are currently trading in the $1,200-1,300/tonne CFR Northeast Asia range, down $200/tonne since the start of the year.

"The problem is that there are a lot of inventories in the market and demand is very weak," a global MEK producer said. "It is too early to say when we will see demand restored to normal levels."

MEK stocks held by traders in key markets such as South Korea, which depends entirely on imports for its needs, are estimated to be as much as 10,000 tonne. This is enough to last for two months, said the sources.

Some industry watchers said the downturn in prices was a much-needed correction after prices peaked at $1,600/tonne CFR Northeast Asia in late November 2004, when a spate of planned and unplanned shutdowns at both regional and global plants had kept supply tight and encouraged purchases at higher levels.

South Korean distributors, who are saddled with heavy inventories, are now trying to re-export MEK to markets such as Southeast Asia. Chinese producers are also keen to export material to the region, given that imported cargoes sold on an ex-tank basis back home are currently around Rmb11,700-11,800/tonne ($1,200/tonne).

This has raised concerns that MEK prices in Southeast Asia, which are around $1,400-1,430/tonne CFR, are poised to head south due to the availability of cheaper material.

There was talk last week that cargoes of up to 2,000 tonne from Northeast Asia are expected to arrive in Southeast Asia in April, adding to the supply glut. The transaction prices are rumoured to be around $1,300-1,350/tonne CFR Southeast Asia, although this could not be confirmed.

"Frankly, the producers are worried about the coming cargoes," said a Southeast Asian solvents importer." Although no offers have been announced for April, some of them have indicated that they are likely to adjust their prices downwards."

Few April offers emerged last week, but some producers acknowledged that it would be difficult to clinch deals above $1,400/tonne CFR. A 300 tonne Japanese MEK cargo for early-April lifting was heard sold at $1,350/tonne CFR Southeast Asia this week - $50/tonne lower than the original offer price.

"We haven't offered April cargoes yet but we expect that prices will go down in April. It's only a matter of how much," a producer said.

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