FocusAsia solvent xylene softens on poor demand

15 September 2008 06:20  [Source: ICIS news]

By  Mahua Chakravarty

SINGAPORE (ICIS news)--Asia’s solvent grade xylene could fall below $900/tonne in the coming weeks after touching a seven-month low last Friday, on poor demand and a steep drop in crude and isomer grade xylene values, said traders and producers on Monday.

"I expect prices will continue to fall below $900/tonne as demand has slowed down in China and southeast [SE] Asia," said a Singapore-based trader.

Prices were assessed $80-100/tonne lower last Friday at $920-950/tonne FOB (free on board) Korea, the lowest seen since the week ended 29 February.

Dropping crude values, which touched $99/bbl during Friday’s overnight trading, along with plummeting isomer grade xylene values, had exerted a lot of pressure on this market, said traders.

Demand from the key Chinese market had also slowed down due to this downtrend and buyers did not seem keen to finalise deals, traders and producers added. Hence, only one or two cargoes were heard traded last week despite the estimated low inventory levels in China.

Looking forward, there was limited hope of a recovery in this market, said traders.

"Demand will decrease in the fourth quarter," said a Chinese trader.

The Golden Week holidays in October and the onset of winter would further weaken demand for solvents, said Chinese traders.

A slowdown in the Chinese economy had also affected business among downstream factories, a number of which had to reduce or shut down operations, traders added.

"People are no longer blaming the Olympics, [but] economic slowdown is the major reason," the Chinese trader said.

Demand for solvent grade xylene could see further declines as Chinese buyers started looking for isomer grade xylene cargoes from the end of last week, as the latter’s price was almost similar to solvent grade xylene values, said traders.

Chinese solvent buyers are known to prefer isomer grade xylene when it is priced at par or lower than solvent grade xylene.

In SE Asia, the start of monsoon from September-October along with the Muslim holy month of Ramadan was also affecting demand, said SE Asia-based traders.

Hence, towards last week’s close, regional traders and producers were seen caught in a state of confusion, not certain where prices would bottom.

"I’m not in the market, [as] yesterday [the] MX market collapsed," said a key South Korean producer, referring to the sharp drop in mid-week isomer grade prices. "I don’t know [what is] the right price," he added.

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By: Mahua Chakravarty
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