Focus story by Fahima Khail
SINGAPORE (ICIS)--Spot flexible polyols prices in the Middle East, including the Gulf Cooperation Council (GCC) area, fell for the first time since late 2013 during the week ended 3 April and may fall further, market sources said on Friday.
According to ICIS data, prices for spot flexible polyols in the Middle East fell by $50/tonne to $2,350-2,420/tonne CFR (cost & freight) GCC/Middle East on 3 April from last week. Spot rigid polyols also fell by $50/tonne to $1,950-2,000/tonne CFR GCC/Middle East in the same period.
The falls were attributed to decreases in feedstock propylene oxide (PO) prices in parts of Asia but also to price cuts by some producers, facing mounting inventory pressure.
Some sellers were said to have elevated inventories, sparking a round of sell-off in some markets in the region.
China based exporters said they lowered their offers of flexible and rigid polyos by at least $50-100/tonne because of price falls in the domestic PO market.
Local PO prices in the major China market were heard sliding sharply during the week ending 28 March.
Consecutive rounds of deep price cuts by some PO producers were heard to have triggered a severe downward spiral as buyers held back on purchases in anticipation of further price reductions while sellers implemented steeper price cuts to attract buying interest.
According to ICIS data, domestic PO prices across China fell by CNY 900-1,3001 to 12,900-14,000/tonne China DEL.
As a result of price falls domestically the spot PO import market was at a standstill during the week ending 28 March, with most suppliers heard retreating to the side lines and buyers citing difficulties in giving buying indications for imports.
Consequently import PO prices fell by $50/tonne at the low end to $1,900-2,030/tonne CFR China, according to ICIS data.
The price decline in China was said to impact the international market, consequently lower offers for polyether polyols were heard in the Middle East from European as well as Asian suppliers during the week for April cargoes.
Producers and buyers in Europe discussing April contracts said that demand in April was showing signs of slowing down as the bedding and furniture season traditionally draws to a close at the end of the first quarter.
Consequently more material is expected to be exported to the Middle East, easing the recently tighter supply situation further.
There is a consensus amongst buyers that polyols spot prices are expected to fall further in April as well as May.
An end-user based in the GCC region said buyers will be cautious of overstocking and thus will be holding their bids.
“We will see a sort of ‘material dumping’ in the next two weeks. I am waiting for the best offer. $2,300/ [tonne CFR GCC] seems like a decent price for April shipments,” the end-user said.
However, some sellers said that the decline was only temporary and market price would pick up again within the next two weeks in April.
A market player said it has seen “some weakening starting last week in the Middle East as well as some parts of Africa”.
However, the source added that given that some major shutdowns are about to start again in April and May in the Asia Pacific region it expects “that PO will dry up and prices might start picking up again”.