FocusAsia sees unusual petchem flows from non-traditional sources

17 March 2009 06:01  [Source: ICIS news]

By Prema Viswanathan and Bohan Loh

SINGAPORE (ICIS news)--Low freight rates and Asia’s comparatively better appetite for petrochemicals have been causing the unusual flows of cheaper cargoes from the US, Europe and South Africa into the region, market sources said on Tuesday.

This additional supply from non-traditional sources at a time when even demand in the region is very soft, exerts further price pressures on Asia’s petrochemical products, they said.

“I have purchased polypropylene (PP) and polyethylene (PE) from Mediterranean Europe, South America and even South Africa in recent weeks, as the prices are lower than for Middle East imports,” said an Indian converter.

With the availability of lower priced cargoes from alternative sources coupled with the expected start-up of capacities in the Middle East, Asian petrochemicals players are now expecting producers to lower prices, traders said.

Indian importers and end-users traditionally secure cargoes from Middle Eastern, south east Asian and north east Asian producers due to geographical proximity as well as lower costs of purchases.

But in recent weeks, imports of polyvinyl chloride (PVC) into India from the US have risen.

“Prices of US material are at least $50/tonne (€38.50/tonne) lower than that from South Korea and Taiwan, which are the biggest exporters to India,” said another trader.

US PVC cargoes have not been very acceptable to buyers until recently due to the anti-dumping duty of $45/tonne imposed on the material. But with offers from the US coming down sharply, they have managed to lure buyers, market sources said.

Market sources in China also told ICIS news they have noticed a recent increase in cargo volumes coming from non-traditional sources.

“In February and March, more acetone cargoes from the US and Europe flowed towards China,” said traders and distributors.

Low operating rates at Asian acetone producers of 60-80% also encouraged western competitors to export their material, they added.

Taiwan was the top acetone supplier for the mainland in 2008, accounting for 88,966 tonnes or 25% of total imports for the year, according to data from the China Customs. European producers from Belgium, Spain, Germany and Italy supplied about 18% of total imported volumes.

Similarly a flood of deep-sea butadiene (BD) cargoes into Asia has been depressing prices in the region, traders said.

About 9,000 tonnes of BD are heading from Brazil towards China and Taiwan. But with regional demand also weak, an influx of imported cargoes is creating an additional pressure on prices. BD spot prices in Asia have fallen about $50/tonne in the past month to $500-530/tonne CFR (cost and freight) NE (northeast) Asia due to these surplus cargoes from Latin America, they said.

In February, China’s petrochemical products such as BR, polystyrene (PS) and polyester filament yarn (PFY) saw double-digit price declines compared to the same period a year earlier.

The influx in cross-Atlantic and Pacific shipments into Asia is due to the general belief that the region remains a “pillar of growth” amid the doom and gloom of global recession, analysts said.

The weakness in the shipping industry also meant cheaper logistics costs, presenting opportunities for trade between countries that were previously restricted by geographical proximity.

Freight rates from all the key European ports (Antwerp, Rotterdam and Amsterdam) and US ports toward Asia have all fallen in the past two months, said a Singapore-based ship broker.

Another reason why the freight rates are dropping all over the market at the moment is because there are a number of new vessels being built adding to the tonnage availability, she said.

 “[Ship] owners are now desperately trying to push back the delivery dates of their new vessels,” she added.

A Pakistan-based polymer trader said he was expecting surplus material from new Middle East capacities in the country, which could put prices under pressure.

“Customers are expecting lower prices for April shipment cargoes, as there is a likely influx of surplus material from the new Middle East plants,” he added.

($1 = €0.77)

With additional reporting by Jessia Shen from CBI China

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