FocusChinese BPA offers not rising in tandem

22 February 2008 04:56  [Source: ICIS news]

By Jeremiah Chan

SINGAPORE (ICIS news)--Despite pressure on Asian bisphenol A (BPA) prices to rise, domestic values in China – the region's largest spot buyer of material – are not moving up in tandem, traders and sellers said on Friday. 

Scarcity of cargoes in the region after unscheduled production cuts at Mitsubishi's production facility located at Kashima since late-last year provided the impetus for sellers of material in the region to hike offers.

They raised offers to $1,950-1,960/tonne (€1,326-1,333/tonne) CFR (cost and freight) China, excluding antidumping duties, with deals reported done to Chinese traders at around the $1,950/tonne mark this week.

This was up from three months earlier, when offers from producers were heard around $1,830-1,850/tonne, according to global chemical intelligence service, ICIS pricing.

Crude values hitting record highs above $100/bbl earlier this week also helped to bolster the bullish sentiment.

Producers took the opportunity to hike their prices as much as possible before an expected price downturn in the third quarter as additional capacities coming on-stream.

"Demand from the downstream epoxy resin sector in China will reach its seasonal peak in March," the marketing official of a major producer based in Taiwan said in Mandarin.

The months of March, April and May would be a "good opportunity" for BPA producers to maximize their margins, he added.

Domestic prices for imported cargoes in China, however, were heard at yuan (CNY) 17,100-17,200/tonne ($2,395-2,409/tonne) ex-warehouse, which would translate to import parities of $1,830-1,840/tonne CFR, importers and traders said.

The relatively low prices in the country's domestic market were heard to be due to healthy local inventories after the seasonal lull in production during the Chinese New Year festivities starting in the first half of February.

Higher epichlorohydrin (ECH) values also dampened demand from epoxy resin makers.

ECH, together with BPA, are the feedstocks for epoxy resin production.

With the bulk of spot buying ideas from end-users in the epoxy resins industry below $1,900/tonne CFR China, most downstream customers procuring cargoes on local-currency basis, local distributors said.

A trader based in Shanghai also attributed the cargoes accepted by traders to the cash shortage which several Chinese trading firms were facing.

"The Chinese local traders can accept higher prices, as they are buying the regional cargoes on credit and selling them on a cash basis in domestic currency," he said.

He added that such traders were not profiting from such deals, and that the cash received from the transactions were used for speculation on the stock or property markets. 

Major sellers of BPA in the region include Nan Ya Plastics, Kumho P&B, LG Chem, and Mitsui Chemicals.

(1 = CNY7.14)

By: Jeremiah Chan
+65 6780 4359

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