China petrochemical futures fall 4-5% on falling crude values

17 May 2010 12:24  [Source: ICIS news]

SINGAPORE (ICIS news)--China’s petrochemical futures fell 4-5% from the previous settlement as a result of weak crude values and general concerns about the wider impact of Europe’s debt issues, traders said on Monday.

“There were concerns that Europe’s debt issues could mean weaker European demand for Chinese exports, which in turn would hit the demand for a range of commodities, including petrochemicals,” said a source with futures brokerage International Futures.

Trading of September linear low density polyethylene (LLDPE) futures on the Dalian Commodity Exchange (DCE) was halted in the afternoon session after falling by 5% to yuan (CNY) 10,210/tonne ($1,495/tonne), according to data from the DCE.

Trading of September purified terephthalic acid (PTA) futures on the Zhengzhou Commodity Exchange (ZCE) was also halted in early afternoon after falling by 4% to CNY7,570/tonne, according to ZCE data.

Under the two exchanges’ trading rules, a transaction price becomes the floor price if it is established after a 4% and 5% fall, respectively, from the previous settlement price, and subsequent offers below this level are not accepted on the same trading day.

September polyvinyl chloride (PVC) futures closed at CNY7,175/tonne on the DCE, down 4.5%, or CNY335/tonne, from the 14 May settlement price.

“The sharp falls [in PTA futures] were sparked off by tumbling crude values,” said a China-based trader, adding that falls triggered panic selling in the physical PTA market.

Spot offers in the physical PTA market on Monday dropped to $890-900/tonne CFR (cost and freight) CMP (China Main Port) for cargoes exempted from antidumping duties, and to $870-880/tonne CFR CMP for cargoes subject to antidumping duties of up to 4.2%, which was a decrease of around $60/tonne week on week, according to global chemical market intelligence service ICIS pricing.

The physical PTA market also faced weak demand from the downstream polyester yarn application market.

“The sales-to-output ratios of polyester yarn were as low as 20-30% over the weekend. We had to slash offers today to entice buyers because of the mounting inventory pressure,” two Zhejiang-based end-users said.

Polyester yarn inventories were reported at 20-25 days on average, which is higher than the normal 10-15 days.

Chinese LLDPE producers on Monday dropped their list prices by as much as CNY700/tonne to CNY10,600-10,850/tonne ex-factory in response to the downcast market sentiment, local traders said.

Additional reporting by Chow Bee Lin and Aaron Cheong

($1 = CNY6.83)

For more on LLDPE, PTA and PVC, visit ICIS chemical intelligence
Read John Richardson and Malini Hariharan’s Asian Chemical Connections blog
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By: Becky Zhang
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