Plastics Monitor: Outlook bleak as demand wanes

03 April 2006 00:00  [Source: ICB]

A slow recovery in demand saw some price erosion in Asia’s polyethylene markets, although numbers have now started to stabilise. Buying interest saw an upturn in most countries because customer inventories were still relatively low and were not being rebuilt due to the price slide seen in the past month.

Buying activity in March in SE Asia outperformed China for the first time since the start of the year. Although tight supply in Malaysia and Indonesia helped to stem the price downtrend, reduced stockists’ levels in Vietnam bolstered prices to stay stable-to-firm.

Supplies in NE Asia are expected to tighten with shutdowns scheduled in March and April.

HdPE film trades in China have been slow, with traders and converters unconvinced of a price upswing in April. However, easing stocks among NEA producers, limited export volumes out of Thailand, Malaysia and Indonesia, and low converters’ stocks are key drivers for hikes.

After a few weeks of lacklustre demand, offers for lldPE film for Korean cargoes lifting at the end of March/early April are hovering around $1100/tonne CFR CMP levels. Stronger demand was reported in SE Asia, and prices moved back above $1100/tonne CFR. The outlook for April remained rather bleak with customers expecting the weakness to continue until early June.

LdPE trades in China are also at a standstill due to continually poor demand. Customers are in no rush to buy cargoes until the next high consumption season in June. The poor demand was partially offset by tight supply and manageable inventory levels at major suppliers. A Singaporean producer announced offers for April ldPE cargoes at $1120/tonne CFR Asia, down $30/tonne on March. Citing limited exporting quantities, a major Korean producer posted offers at high-$1160s/tonne CFR CMP and $1180/tonne CFR SEA.

The downtrend in the polypropylene (PP) market since mid-February is showing signs of stabilising. Trades have been thin amid abundant supply and weak demand. PP producers’ price outlook mid-March was cautiously optimistic, particularly with upcoming shutdowns slated for March and April. In the Chinese domestic market, poor consumption, high inventories with local producers and weaker crude numbers continued to dampen buyers’ confidence of an upturn in pricing. In SE Asia, export volumes from Thailand are limited as producers focus more on domestic sales.

Meanwhile, The Polyolefin Company plans to convert its 150 000 tonne/year lldPE plant in Singapore into a 200 000 tonne/year PP line, in anticipation of increased competition from Middle Eastern PE makers who have lower feedstock costs. Construction is scheduled to be completed in Q3 2006.

Demand in the Asian polystyrene market remained subdued, with most buyers keeping to the sidelines. Declining prices of feedstock styrene monomer limited orders from the US and Europe for finished products, prompting buyers to wait and see. In mid-March, prices of GPPS slipped to $1020-1030/tonne CFR Hong Kong/China and HIPS at $1060-1070/tonne. Traders were keen to reduce in-hand stocks in view of falling prices, but buyers were non-committal. Prices in late March, however, started to recover as crude oil and SM costs rose. Some PS buyers emerged to replenish inventories. Others picked up some material in anticipation of improved demand in late April. Prices subsequently firmed to $1050-1070/tonne CFR Hong Kong for GPPS and $1080-1100/tonne for HIPS.

Continued sluggish demand for PVC in Asia started to engineer increasingly bearish expectations. Buyers have delayed orders and, where possible, retreated to the sidelines to wait for lower prices. Producers have reacted by slowing production, but it has been a case of too little too late. In an attempt to stimulate demand, Japanese and Taiwanese producers nominated $720-740/tonne CFR for April, representing almost a 9% drop compared with March settlements. The response was generally positive: end-users have recently started to replenish stocks. After some slippage during 1H March, the domestic Chinese market stabilised and was showing signs of edging higher again.

Middle East threat

US and European olefins and polyolefins producers may struggle by the end of the decade as they compete with greatly expanded capacity in the Middle East. Production is expected to surge in the region by 2008, and with its growing economy, China had been expected to soak up the material. However, DeWitt managing director Earl Armstrong said at the recent global petrochemical review conference, that China’s chemical consumption growth rate was likely to fall below expectations. Rather than an annual growth rate of 15%, 10% was now anticipated. Therefore, he said, the US and Europe may become awash in polyolefins produced by Middle Eastern plants.

Asian commodity polymer prices, $/tonne

	NE Asia	SE Asia
High-density polyethylene (hdPE)
Film grade	1090-1100	1090-1110
Yarn and injection moulding	1070-1090	1080-1090
Linear low-density polyethylene (lldPE)
GP film grade	1090-1100	1090-1110
Low-density polyethylene (ldPE)
GP film grade	1080-1100	1090-1110
Polypropylene (PP)
GP film grade	1080-1100	1070-1090
Raffia/injection moulding	1070-1080	1080-1090
GP copolymer	1100-1120	1110-1130
Polystyrene (PS)
General purpose	1050-1070	1050-1070
High impact	1080-1100	1080-1100
Polyvinyl chloride (PVC)
GP suspension	720-740	730-740

The above prices are a guide to market levels and were compiled by the ICIS Chemical Business team in the middle of the week before publication. Special grades or material may command premiums. PVC commentary by Harriman Chemsult.

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