04 August 2008 15:24 [Source: ICIS news]
By Linda Naylor
LONDON (ICIS news)--Arbitrage opportunities between Asia and Europe are looming as China polymer prices weaken and Europe prices rise but few players are so far willing to take the risk, market sources said on Monday.?xml:namespace>
There were no widespread reports of material being offered into Europe from Asia at present but even with import duties of 6.5% for many Asian exporters of material, these price levels are workable, and any further downward movement in Asia, or upward in ?xml:namespace>
The six-week time lag that will ensue after new business is booked has led to hesitation from potential buyers, however.
“I don’t intend to have much material in my warehouse by September,” said one trader, unsure of how monomers would fare in the fourth quarter.
“People see the price difference between Asia and
High density polyethylene (HDPE) blowmoulding prices fell by $50/tonne (€32/tonne) to $1,650/tonne CFR (cost and freight) last week in China, while European levels continued their steady climb, to net levels of €1,400/tonne FD (free delivered) NWE (northwest Europe) in early August having gone up €140-200/tonne in July.
European HDPE producers are looking for even higher prices throughout August, having mostly covered the €190/tonne increase they took in third-quarter ethylene.
The product which showed most potential in terms of arbitrage opportunities is polystyrene (PS) but even here expectations of an influx of material are not widespread as upstream markets remain volatile.
General purpose PS (GPPS) prices are down to $1,680-1,700/tonne CFR in
European PS producers are expected to be able to increase prices in August as styrene monomer contracts had gone up, but it is clear prices are increasing only as production is slashed, not based on strong demand, and the market is widely regarded as weak.
“I can see that the gap between Asia and
PS feedstock styrene was playing a major role in this market, and there were some expectations of a change in styrene prices as the gap between Asia and
“Either Europe goes up or
Polypropylene (PP) arbitrage possibilities were less imminent than for HDPE blowmoulding and PS.
Asian homopolymer injection PP fell by $80-100/tonne last week, to $1,850-1,900/tonne CFR, and demand was weak in the key
The price for the same product delivered to European customers has risen by over €100/tonne over the past four weeks, and looked likely to strengthen further. Early August trading was at €1,300/tonne FD NWE, on a net basis.
This was still too high to work into
It is concerns over what may happen to feedstocks in the fourth quarter which led to hesitation from most players, however.
“It is clear that prices will increase in August but September is open. The picture is very different from a month ago when they settled quarter three ethylene,” said one European buyer of commodity grades of PE, PP and PS.
Brent crude climbed towards $145/bbl in early July and is currently trading in the mid $120s/bbl range, leading to speculation over the direction of fourth-quarter monomer contracts, which will inevitably impact polymer pricing.
Uncertainty and record high polymer prices led to hand-to-mouth buying in most markets.
“It is clear that the current upward trend in pricing in
Polyolefins producers in
($1 = €0.64)
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