FocusChina petchem prices rally amid restocking post-Lunar New Year

25 February 2010 07:37  [Source: ICIS news]

By Nurluqman Suratman

SINGAPORE (ICIS news)--Prices of petrochemical products in China soared this week after the Lunar New Year holidays as end-users began restocking, with strong crude values supporting the bullish post-holiday market sentiment, analysts and market players said on Thursday.

With crude expected to stay at current levels of around $80/bbl (€58.4/tonne), the price uptrend for petrochemicals may continue through to June despite the recent credit tightening measures of the government, analysts said.

“Many producers hiked prices post-holiday … indicating they are optimistic about the market outlook,” said Wang Jing, an analyst from Shanghai-based brokerage firm Orient Securities.

Higher prices were well supported by the general improvement in consumption, industry sources said.

“Crude has breached $80/bbl and petrochemical prices in China are on the rise. Demand is stable and now the perspective is that prices will hold higher,” said a trader.

Prices of butadiene rubber and styrene butadiene rubber (SBR) in the Chinese market surged by about CNY1,000/tonne ($146.4/tonne) this week, in line with the strong gains natural rubber values

SBR prices hit CNY18,000/tonne ex-warehouse (EXWH) and butadiene rubber (BR) prices jumped to CNY21,500-22,000/tonne EXWH this week from pre-holiday levels.

The Chinese market was closed for business from 13 February to 21 February for the Lunar New Year celebrations.

Acetone prices, likewise, firmed up to more than CNY9,000/tonne this week from CNY8,900/tonne prior to the festive season, traders said.

Methyl methacrylate (MMA) also mirrored the trend as buyers started to pile up inventories amid tight supplies in the market, said an MMA seller.

Domestic MMA prices had risen to CNY15,000-15,500/tonne DEL (delivered) from CNY14,700-15,000/tonne as demand from downstream PMMA sector was strong, industry sources said.

The price trend may continue as MMA imports into China had been limited recently, said a seller.

Meanwhile, prices of methyl tertiary butyl ether (MTBE) in China have not budged at CNY6,400-6,500/tonne, but market players were expecting a marginal value increase in March given higher demand, traders said.

Teapot refineries in the Shandong province have ramped up MTBE operating rates to around 90% from 60% prior to the Chinese new year holidays, traders said.

“MTBE prices may increase by 2-3% but there will be a limit because Beijing has not raised retail fuel (gasoline) prices,” said one Chinese trader, adding that the market is bracing for a price hike.

Pump prices in China, the world’s second-biggest energy user after the US, are state-regulated.

Chinese energy giants PetroChina and Sinopec recently raised wholesale gasoline prices by CNY100/tonne, within a price band, to reflect robust crude futures that topped $80/bbl, traders said.

Prices of polyolefins also increased after the holidays, with state-owned Sinopec raising the ex-works prices of different polyethylene (PE) grades by around yuan (CNY) 200/tonne last Sunday.

But the uptrend was cut short mid-week as buying activity in the market failed to sustain a strong momentum, traders said. Chinese petrochemical major PetroChina cut its prices for different PE grades on Thursday.

Trade was slow in the domestic polymer market as a number of plastic finished goods factories were still closed and would just resume production next week, local traders said.

Middle Eastern and South Asian PE and polypropylene (PP) suppliers into China were mulling hiking prices amid a resurgence of buying activities in the biggest petrochemical importer in Asia, industry sources said.

China’s strong appetite could lead to further tightening of polymer supply in the region, boding well for prices to move up further, they said.

“The improvement in Chinese market sentiment and the rise in crude values have had a ripple effect on buying interest in the Middle East,” said a source close to a Middle East PE producer.

The Indian polymer market was also taking heart at the bullish sentiment in China.

“Last week the market outlook looked uncertain, and there was an expectation that prices would come under downward pressure due to abundant domestic availability,” said a PP converter in Mumbai.

“But this week, sentiment is much more bullish, thanks to the improved Chinese appetite for polymers,” said a PP converter in Mumbai.

Prices of naphtha - the main feedstock for petrochemical production - also looked set to continue rising, traders said.

“If ethylene prices still keep above $1,200/tonne NE (northeast) Asia, I don’t think the naphtha market will be weak. Margins are still healthy,” said a trader.

Current price discussions for ethylene this week were hovering below $1,300/tonne CFR Asia levels, weighed down by a surge in unsold cargoes from Asia and the Middle East.

A 3,500-tonne cargo was heard sold to China at around $1,265/tonne CFR for arrival in the second half of March, while a 4,000-tonne cargo was heard changing hands at around $1,280/tonne CFR SE Asia for arrival before mid-March, sources said.

($1 = €0.74 / $1 = CNY6.83)

With additional reporting by Felicia Loo, Chow Bee Lin, Anu Agarwal, Judith Wang, Helen Yan, Fanny Zhang and Prema Viswanathan

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections
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By: Nurluqman Suratman

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