21 March 2013 02:48 [Source: ICIS news]
By Clive Ong
SINGAPORE (ICIS)--Asia polystyrene (PS) prices remain on a downtrend as a result of waning demand amid sentiment clouded by Eurozone worries sparked by Cyprus bank levy crisis, producers and traders said on Thursday.
“As resin prices continue to drop, most buyers have chosen to wait for lower prices,” said a producer in southeast Asia.
Spot prices have tumbled to the low $1,800/tonne (€1,386/tonne) CFR (cost & freight) China for the week ended 15 March as traders continued to liquidate stocks. Spot prices were at a high for the year at around $1,905/tonne CFR China in early February, according to ICIS data.
“Sentiment is still poor and traders are trying to reduce in hand stocks,” said a producer in Taiwan.
The fall of feedstock styrene monomer (SM) prices to below $1,650/tonne CFR China in early March has weighed on PS values.
“Buyers are waiting for lower prices and hence buying momentum has been poor in recent weeks,” said a trader in Hong Kong.
Some suppliers have slashed offers to below $1,800/tonne CFR China to draw buyers forward but trade remains largely muted.
Recent events in the US and Eurozone has rattled the markets and raised concerns that demand for Asia made goods could plummet, hence reducing consumption of resins like PS.
The Italian elections deadlock and rejection of austerity coupled with the Cyprus bank deposit levy crisis fuelled speculation that the Eurozone debt crisis could flare up again.
The president of Cyprus will present a "Plan B" for funding a controversial bailout later on Thursday to politicians after the country’s parliament rejected a one-time levy on bank deposits.
Cyprus's banks have been shut all week to prevent mass withdrawals and will stay closed till early next week while politicians try to figure out an alternate to the bank levy, which was a condition of a €10bn EU-IMF bailout for Cyprus.
The US budget cut was also thought to potentially derail the fragile economic recovery.
Consequently, Asia traders opted to liquidate resin inventories in view of uncertain demand in the near term.
Some producers also anticipate weak demand to persist for the first half of the year as end-users of PS remained reluctant to stock up.
Some suppliers expect traders’ stocks to be exhausted over the next few weeks which could then put a floor underneath prices.
“When the selling pressure is gone from the trade, prices could then stabilise,” said a Korean producer.
Meanwhile, some producers have indicated trimming PS output in April if demand remains lacklustre. Some have indicated operating at around 50% to combat rising inventories.
PS is a resin used in packaging, toys, consumer electronics, and other consumer items.
($1 = €0.77)
Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections
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