A subdued end to a good year

By Malini Hariharan

Petrochemical markets, with a few exceptions, will be closing the year on a quiet note.

In polyolefins, buying activity in China has slowed down and sentiment remains weak weighed down by the Chinese government’s decision to hike bank reserve requirements. This is despite the recent rally in crude oil prices.

Prices of some grades of linear-low density polyethyelene (lldPE) and high-density PE (hdPE) were assessed slightly lower by ICIS pricing last week while polypropylene (PP) prices were unchanged. However, limited availability helped push up PP prices in South Asia by $30-40/tonne. And unrelenting tight supply of low-density PE (ldPE) also pushed up prices in China by $30/tonne.

The Asian ldPE supply situation is unlikely to improve in the near future with PTT Chemical postponing the restart of its 300,000 tonnes/year plant due to technical problems. The plant was shut in mid-November and was expected to restart on 15 December.

Upstream, ethylene prices improved slightly on buying support from China while propylene prices weakened.

Meanwhile, paraxylene (PX) and purified terephathalic acid (PTA) markets will be ending the year on a strong note. Spot PX prices inched up by about $25/tonne last week fuelled by a higher-than-expected Asian contract price nomination. The PX majors have nominated a $125-155 hike in January contracts.

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PTA also moved up by about $20/tonne despite uncertainty in the polyester segment where demand has softened in recent weeks. Chinese textile mills have lowered operating rates and production is expected to improve only after the New Year holidays in February.

But PTA producers are bullish about prospects in 2011. This is evident in Chinese American Petrocemical Co’s (Capco) decision to restart one of its two idled lines in early February 2011. The line, with a capacity of 250,000 tonnes/year, was shut in mid-2007 because of squeezed margins.

And polyolefin producers are also optimistic despite current market conditions. They are now pinning their hopes on a revival in demand ahead of the Chinese New Year holidays in February. But the blog believes that implementing price hikes will not be easy. Availability looks set to grow and there is as yet no reason for traders to take a long position.

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