FocusAsian petchem values plunge on destocking, poor sentiment

20 May 2010 07:32  [Source: ICIS news]

By Pearl Bantillo

SINGAPORE (ICIS news)--Petrochemical prices in Asia plunged this week, partly due to destocking activities, with a strong likelihood of further declines amid high inventory levels and prevailing poor market sentiment, market players said on Thursday.

Mounting concerns over Europe’s debt crisis, which could derail the recovery process of the global economy, weighed heavily across the financial and commodities markets, sending crude tumbling to a seven-month low of $67.90/bbl (€55/tonne) early in the week.

Asian exports may be at risk if Europe were to undergo a prolonged recession, given a plethora of austerity measures that the western region needs to adopt to address its debt problems.

“The financial crisis or uncertainty in the EU … might have an impact on consumer confidence that would then impact the demand on some of the products,” Lynne Lachenmyer, senior vice president at ExxonMobil, told ICIS news last week.

Propylene spot prices fell below $1,300/tonne CFR (cost and freight) NE (northeast) Asia level this week, with offers at $1,250-1,280/tonne CFR China, due to deteriorating conditions in the derivative polypropylene sector, market sources said.

Traders were willing to offload June propylene cargoes in the low $1,200/tonne CFR China levels, they added.

“We don’t want to import any more propylene because prices have come off so sharply and we don’t know how much more they will drop,” said a PP producer in China.

End-users in China had mostly stayed on the sidelines amid concerns that propylene prices may weaken further, industry sources said, also citing competitively priced material available from the domestic market,

Local prices in Shandong fell yuan (CNY) 400-500/tonne ($58.6-73.2/tonne) week on week to CNY9,500-9,800/tonne ex-tank, market sources said.

The polyethylene market, meanwhile, was plagued with high stocks, with Chinese petrochemical majors PetroChina and Sinopec currently holding a total of 750,000 tonnes of the material, industry sources said.

The stocks were just a quarter short of the peak of 1m tonnes in August 2008, before the financial crisis struck.

Fearing a repeat of the crisis scenario in September 2008, when polyolefin prices had a $100-200/tonne weekly decline, traders are currently rushing to liquidate cargoes, even at a loss, market sources said.

The cargoes were mostly of Middle East origin, they said.

Some Chinese traders were offering Iranian film-grade high density polyethylene (HDPE) at $1,170-1,180/tonne CFR China this week for prompt lifting at the bonded warehouse, market sources said.

Benchmark HDPE was assessed at $1,180-1,240/tonne CFR China last Friday, down $20-30/tonne from a week earlier, according to ICIS pricing.

Meanwhile, weak demand caused methyl tertiary butyl ether (MTBE) prices to slip $10/tonne to $780-800/tonne FOB (free on board) Singapore.

Suppliers were banking on a seasonal pick-up in gasoline consumption late this month to early June - the driving season in the northern hemisphere - to buoy the MTBE market, market sources said.

MTBE is used in gasoline blending.

But as the current economic situation in the US and Europe does not bode well for summer travel, gasoline demand may not be as strong as in the past and provide no reprieve for MTBE, market sources said.

“Many people are optimistic that once the West starts to look for cargoes again, MTBE prices will recover, but I don’t know now when this is going to happen,” said a trader.

The wave of price declines also hit the Asian paraxylene market, with spot values tumbling near seven-month lows at $960-975/tonne CFR (cost and freight) Taiwan on Wednesday.

Styrene butadiene rubber (SBR) values followed the southbound direction, with non-oil grade 1502 product falling by $150/tonne to $2,200/tonne CFR (cost and freight) in southeast Asia and India, and by $117/tonne in China.

Players in the polymeric mono di-isocyanate (PMDI) and toluene di-isocyanate (TDI), meanwhile, were wary of possible influx of lower-priced cargoes from Europe due to the substantial weakening of the region’s unified currency.

“I had just received an [TDI] offer from a Poland producer at $2,780/tonne CFR China Main Port (CMP),” said a Chinese trader said in Mandarin.

Spot TDI prices were at $2,850-2,880/tonne CFR CMP/Hong Kong on 19 May, according to ICIS pricing.

“The depreciation of the euro currency gave European sellers incentives to offer at a lower level, which may weigh down the market,” said a key supplier based in China.

With additional reporting by Chow Bee Lin, Loh Bohan, Ong Sheau Ling, Peh Soo Hwee, Gabriela Wheeler and Helen Yan

($1 = €0.81, CNY6.83)

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections
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By: Pearl Bantillo
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