21 December 2012 04:50 [Source: ICIS news]
SINGAPORE (ICIS)--Asia’s diethylene glycol (DEG) spot prices surged to a 15-month high, in line with strong Chinese domestic prices, on the back of strong buying activity from speculative traders, market sources said on Friday.
Traders’ optimism is because of an upbeat outlook for the Chinese and US economies and persistently tight spot availability of Chinese yuan-denominated cargoes, sources said.
The Chinese domestic DEG prices surged to yuan (CNY) 8,950-9,000/tonne ($1,437-1,445/tonne) EXWH (ex-warehouse) or $1,190-1,197/tonne on an import parity towards the close of 20 December, up by CNY300/tonne week on week following a 4% increase seen in the week ended 15 December.
Asia’s DEG prices rose to $1,195-1,200/tonne CFR (cost & freight) China Main Port (CMP) on 21 December, up by $35-40/tonne from the previous week.
“We have been hearing positive news on the Chinese and US economies in the past two weeks, and that helps underpin buying interest from speculative traders,” a major Shanghai-based DEG trader said.
Buying activity from traders, who aim to obtain cash in local currency while paying on a US dollar-based LC (letter of credit) 90 days payment basis, was exceptionally high because of narrower price gap between US dollar prices and the import parity of Chinese domestic prices, the trader said.
“The narrower the price gap, the lower the cost traders will pay for getting cash,” the trader added.
The premium of US dollar prices to the import parity of Chinese domestic prices reduced to $3-5/tonne in the week compared with $11-13/tonne in early December, according to ICIS.
The tight supply of Chinese yuan-denominated spot cargoes, as a result of slow customs clearance for imported cargoes at the year-end busy season, lend additional upward pressure on prices, a major regional trader said.
“DEG’s port inventory [in China] is climbing as more imports have arrived at this period of time, but the availability of yuan-denominated cargoes is limited because of slow customs clearance,” the trader said.
The actual demand from the major downstream unsaturated polyester resins (UPR) sector remained stable, according to major UPR makers in China.
The average operating rate of UPR plants are hovering at close to 60% capacity, according to Chemease, an ICIS service in China.
($1 = CNY6.23)
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