17 February 2009 11:04 [Source: ICIS news]
SINGAPORE (ICIS news)--Rare cargoes of US-origin vinyl monomer chloride (VCM) are making their way to China due to the widening spread between US and Asia VCM prices, traders and producers said on Tuesday.
Shipping fixtures showed that at least 10,000 tonnes of US materials are scheduled for March arrival in the port of Tianjin, north China, while 5,000 tonnes more could be heading the same way, a trader said.
Industry sources estimated the cargoes to be sold in the high-$500s/tonne (€390s/tonne) to low-$600s/tonne CFR (cost and freight) NE (northeast) Asia range, in line with prevailing negotiations for March cargoes.
Such arbitrage flow is only possible because of the wide spread between US and Asia prices, which allows traders to overcome the high costs incurred in shipping VCM, a gaseous material, buyers and sellers said.
Industry sources estimated the cost of shipping VCM from the US to Asia to be $150-200/tonne.
Last week, the price of Asia VCM was assessed around $585/tonne CFR NE Asia, while US VCM exports were assessed around $392.50/tonne FOB (free on board) US Gulf, according to global chemical market intelligence service ICIS pricing.
The Asia-US spread of more than $190/tonne is the highest in at least a year and marked a reversal from the -$140/tonne seen only last October.
Most traders and producers, however, said they believed that the VCM cargo flow from the US to Asia would be limited even if the arbitrage window appeared to be open now.
This, sources said, is because US chlor-alkali producers have slashed their operating rates in view of the poor demand for chlorine and caustic soda, thereby limiting their export capacities.
($1 = €0.78)
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