FocusCorrected: Asia petchems trade dwindles ahead of China October holidays

23 September 2009 07:25  [Source: ICIS news]

Correction: In the ICIS news story headlined "Asia petchems trade dwindles ahead of China October holidays" dated 23 September 2009, please read in the final paragraph ...Asia's second biggest economy... instead of ...Asia's biggest economy.... A corrected story follows.

(adds ninth paragraph, recasts 10th paragraph)

By Pearl Bantillo and Judith Wang

SINGAPORE (ICIS news)--Petrochemicals trading in Asia has significantly slowed, accompanied by declines in product prices ahead of the long holidays in China, industry sources and analysts said on Wednesday.

The important Chinese market would be closed for more than a week for the National Day celebrations from 1-8 October, with little hopes of a strong pick-up in demand post the holidays, they said.

Propylene prices fell below the key $1,000/tonne (€680/tonne) CFR (cost and freight) China level for the first time since July due to strong buyer resistance ahead of the holidays.

Surplus propylene has been on the rise due to production cutbacks in the chemical’s downstream sectors – acrylonitrile, propylene oxide and phenol sectors – in October.

Meanwhile, spot deals in Asia’s benzene and toluene markets also declined as most requirements during the holidays had been covered by term contracts, market players said.

Sufficient supply of the two aromatics products dampened regional prices, with discussions in the market focused on material for November and December shipments, sources said.

Market participants said they were hoping prices had bottomed out, which would make a rebound possible after the China holidays.

At 12:00pm Singapore time (0400 GMT), benzene offers were at $765/tonne FOB (free on board) Korea for November shipment, up $20/tonne from Tuesday’s offer but without bids. There was limited buying interest for toluene, with offers heard at $735/tonne FOB Korea for both November and December loadings.

Toluene CFR China prices fell $20-40/tonne over the last two weeks to $760/tonne CFR China on Wednesday.

On the propylene glycol market, meanwhile, trades have also slowed but prices have been on an uptrend since August due to tight supply, industry sources said. Material sold within China were priced at CNY10,300-10,500/tonne ex-tank this week.

Trades in the regional styrene butadiene rubber (SBR) market were crawling in the run-up to the October holidays, industry sources said.

A Korea SBR producer was hopeful that traders and buyers would come back in the second half of October to replenish inventories.

“Chinese buying interest is limited now due to the upcoming holidays,” the producer said.

The Korean SBR producer offers non-oil grade 1502 SBR for October delivery at $2,100/tonne CFR China, up $100-200/tonne from current September spot prices.

Most petrochemical product prices have recovered from the slump in late 2008, primarily driven by China’s demand. But this may just have been driven mostly by inventory restocking since demand for semi-finished and finished goods continues to be weak as can be gleaned by the recent performance of China’s polyester market.

China’s buoyant polyester market at the start of the year supported rallies in prices of fibre intermediates purified terephthalic acid (PTA), paraxylene (PX) and monoethylene glycol (MEG) until demand turned soft in May.

Values of the three fibre intermediates had been held up by cost pressures until early August when they started heading south.

“Petrochemical demand will slow month-on-month in the fourth quarter on seasonal and inventory factors. Many companies have built enough stocks when prices were low,” said Fang Jun, Shanghai-based analyst at Essense Securities.

Some players may be overflowing with inventory with no outlet to dispose them off, analysts said.

“Too much inventory will curb the demand for petrochemical products in the following months,” said Wang Xixin, a Wuxi-based analyst at Guolian Securities.

“The market outlook is not easy to figure out,” said Wang.

Most petrochemical players look to China - the world’s third largest and Asia’s second biggest economy – for indications on how sustainable the demand recovery would be.

($1 = €0.68)

With additional reporting by Steve Tan, Ong Sheau Ling and Helen Yan

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By: Pearl Bantillo
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