FocusAsia PC to remain on downtrend on weak demand, BPA slump

15 July 2011 06:38  [Source: ICIS news]

Compact discs are among the end-products of polycarbonates (PC).By Liu Xin

SHANGHAI (ICIS)--Asian polycarbonate (PC) prices may continue falling for the rest of the year because of sluggish demand and plummeting values of feedstock bisphenol A (BPA), industry sources said on Friday.

Spot PC prices have shed $200-300/tonne (€142-213/tonne) since early April to $2,950-3,050/tonne CIF (cost, insurance and freight) Hong Kong for general purpose (GP)-moulding grade and at $2,900-2,950/tonne CIF Hong Kong for optical grade on 13 July, according to ICIS data.

In the key China market, monetary tightening measures implemented to curb inflation have been taking a toll on PC derivative demand. End-users are being forced to cut operating rates because of tight cash flow.

China imported 969,000 tonnes of PC last year, accounting for 88% of its total consumption at 1.1m tonnes, according to Chemease, an ICIS service in China.

“Demand from China is very weak and unlikely to improve in the near-term,” said a regional trader said.

Export orders also weakened because of a stronger Chinese currency, sources said.

Suppliers are pinning their hopes on a demand recovery in September, when orders for the year-end holidays flow in. However, it remains to be seen if any demand recovery could materialise given a gloomy economic outlook, industry players said.

“The [PC price] downtrend will continue in August, and even in the fourth quarter, given the sharp falls in feedstock BPA numbers,” said a northeast Asian trader.

BPA spot prices plunged $300/tonne or 13% over the past two weeks to settle at $2,000-2,030/tonne CFR (cost and freight) China, according to ICIS data.

This has further dampened the appetite of PC buyers, which are sidelined because of falling prices.

“Price declines are inevitable next moth,” said a PC maker, adding that margins remain under pressure despite falling feedstock costs.

Margins have been squeezed in the first half of the year, particularly for optical grade PC, because of ample supply and stiff price competition, market sources said.

The spread between BPA and PC had narrowed to $600-800/tonnes, which was considered unhealthy by industry players. A preferred spread should be over $800/tonne.

Although PC suppliers have yet to recoup eroded margins, they are expected to cut prices further in the wake of prevailing weak market conditions.

Regional supply is expected to increase soon, when operations at Formosa Idemitsu Petrochemical Corp’s (FIPC) PC plant in Mailiao fully resumes this month and with fresh cargoes expected from Saudi Basic Industries Corp’s (SABIC) 260,000 tonne/year PC plant at Al Jubail, Saudi Arabia.

FIPC’s three production lines in Miaoliao, Taiwan, were shut after a fire at a neighbouring complex caused a power outage on 12 May. The 75,000 tonne/year No 3 line was restarted on 12 July, while the No 1 and No 2 lines, which can each produce 60,000 tonnes/year of PC, are also slated to restart sometime this month, market sources said.

“The market is bearish. Buyers prefer to keep inventory at minimum level as supply is long while demand is weak,” a China-based trader said.

PC is a type of high specification engineering plastic, suitable for moulding and with a high resistance. Typical applications include automobiles, CDs and DVDs, electronic casings, returnable milk bottles, lighting and greenhouses.

Asia PC and BPA price graph

($1 = €0.71)

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By: Liu Xin
+65 6780 4359

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