UpdateAsia petrochemicals fall on bearish global demand outlook

05 August 2011 09:32  [Source: ICIS news]

(recasts headline and lead to focus on petrochemical prices)

By Pearl Bantillo

SINGAPORE (ICIS)--Asian spot prices of petrochemical products fell on Friday, in line with declining crude futures, as market players are worried about the possibility of another global economic recession that will weaken demand for commodities.

At 16:03 hours Singapore time (08:03 hours GMT), US crude futures for delivery in September were down by $1.71/bbl at $84.92/bbl, after plunging by more than $5/bbl overnight.

The plunge in global crude futures has caused Asian naphtha prices to fall.

Naphtha prices for delivery in the second half of September declined by $47.25-48.25/tonne (€33.55-34.26/tonne) to $918.50-921.50/tonne CFR (cost & freight) Singapore on Friday.

“The market is bearish because there is much supply streaming from the Middle East and India,” a trader said.

Methyl tertiary butyl ether (MTBE) prices also declined, by about $60/tonne, to around $1,050/tonne FOB (free on board) Singapore. The lower prices have prompted Chinese buyers to seek imported material amid tight domestic supply as a result of refinery turnarounds.

“The economic situation is not so good. There is much uncertainty in the market and we expect the petrochemical market to slow down for the rest of this year,” said a company source from South Korean firm Kumho Petrochemical.

Kumho Petrochemical, the biggest producer of synthetic rubber in Asia, is planning to reduce its buying ideas for butadiene (BD), a feedstock that is used in the production of synthetic rubbers such as styrene butadiene rubber (SBR) and butadiene rubber (BR), to $3,500-3,600/tonne FOB for August, the source said.

Freight costs are at around $60/tonne within the region and about $120/tonne for intra-regional shipments.

BD prices were assessed at $4,000-4,050/tonne CFR NE (northeast) Asia in the week ended 29 July, down by $100/tonne from the previous week, ICIS data showed.

Purified terephthalic acid (PTA) futures traded on China’s Zhengzhou Commodity Exchange fell by 3.91% to yuan (CNY) 9,286/tonne ($1,442/tonne) at the end of Friday morning trade.

“The market is crazy today. Everyone is watching amid an unclear situation. I think negotiations will be subdued as most players will opt to take a wait-and-see stance,” a trader in eastern China said.

Meanwhile, offers for monoethylene glycol (MEG) were heard at $30/tonne lower at $1,250/tonne CFR CMP (China Main Port) on Friday, as compared with 4 August, but there were no bids, market players said.

Contract prices of linear low density polyethylene (LLDPE) that were traded on China’s Dalian Commodity Exchange (DCE) fell by 5% on Friday morning because of panic-selling activity.

The contract prices for LLDPE for January 2012, the most actively traded, were heard at CNY11,255/tonne on Friday morning, down by CNY755/tonne from 4 August, data from DCE showed.

The weak futures market has also caused prices to fall in the physical LLDPE market in China.

Offers for LLDPE produced in China were at CNY10,500-10,900/tonne EXWH (ex-warehouse) on Friday, down by CNY375/tonne or 3.4% from offers on 4 August, according to Chemease, an ICIS service in China.

Shares of petrochemical companies across Asia also took a heavy beating after a sharp sell-off on Wall Street on 4 August.

“The outlook for sentiment certainly isn’t good. When investors discover that governments are as constrained as they are, gold (and mattresses) start to look attractive. And the impact on the real economy, as 2008/09 makes clear, can be dramatic,” DBS Bank said in a research note.

($1 = €0.71, $1 = CNY6.44)

Additional reporting by Felicia Loo, Helen Yan, Chow Bee Lin, Mahua Chakravarty, Judith Wang
and Amy Yu

For more on butadiene, methyl tertiary butyl ether, monoethylene glycol, polyethylene and purified terephthalic acid, visit ICIS chemical intelligence
Please visit the complete ICIS plants and projects database
For more pricing intelligence, visit ICIS pricing

By: Pearl Bantillo
+65 6780 4359

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