27 June 2013 08:12 [Source: ICIS news]
By Clive Ong
SINGAPORE (ICIS)--Spot polystyrene (PS) prices in Asia may remain under pressure with no demand recovery imminent, particularly in the key China market, industry sources said on Thursday.
Producers have lowered offers by about $10/tonne (€8/tonne) this week to around $1,860/tonne CFR (cost and freight) NE (northeast) Asia, but buyers’ interest has been muted, they said.
“Most buying indications for EPS are below $1,850/tonne this week,” said a producer in Taiwan.
PS and EPS suppliers are uncertain about a rebound in demand in the near term.
“[PS] demand basically did not pick up at all,” said a producer in south China.
Sellers are unwilling to slash prices sharply as feedstock styrene monomer (SM) costs remained high.
SM prices were trading at above $1,700/tonne CFR China, prompting downstream PS sellers to push for higher prices last week, industry sources said.
Most PS suppliers expect little improvement in demand, even when the peak manufacturing season in China is about to begin.
“Very likely, overall demand this year will be weaker than last year,” said a Taiwanese resin producer.
The US and the eurozone – which are major markets for Asian-made goods – are still afflicted with economic malaise. Aggravating the negative sentiment prevailing in markets is China’s economic slowdown, curbing trades.
“End-users are hesitant to stock up as economic data from China pointed to a slowdown and recent strains in Chinese credit markets also added further uncertainty,” said a Hong Kong-based trader.
Larger factories with some orders for finished goods continued to buy resins on a need-to basis and avoided stockpiling. Medium-to-smaller outfits have limited orders and were in no hurry to pick up stocks.
Demand for expandable polystyrene (EPS) was equally lacklustre in Asia despite the peak season for activities in the downstream construction sector. EPS is used as insulation panels in roads and buildings.
“The conservative stance of the new administration in credit has stifled the construction sector to some degree,” said an EPS maker in China.
China had a change of guards in March this year, with Xi Jinping as new president and Li Keqiang as premier, taking the reins from Hu Jintao and Wen Jiabao, respectively.
At the start of the week, Chinese stock markets came crashing after an announcement by People’s Bank of China (PBoC) on Monday that the current liquidity situation in the country is “reasonable”, indicating unwillingness to inject cash into the financial system.
A possibility of a credit crunch that will further slow the economic growth of the world’s second biggest economy alarmed market players in the equity and commodities markets.
Late on Tuesday, the Chinese central bank made another announcement that it provided liquidity to some financial institutions.
While the injection of liquidity could ease the credit crunch to some degree, market players expect little improvement to PS demand in the near term as economic conditions remained weak.
($1 = €0.77)
Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections
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