Asia POM trades to dip through August on seasonal demand lull

09 July 2014 07:27 Source:ICIS News

Focus story by Trixie Yap

Asia POM trades to dip through August on seasonal demand lullSINGAPORE (ICIS)--Spot trades of polyoxymethylene (POM) or polyacetal in Asia may fall 5-10% in July and August, with prices likely to be stable amid a seasonal lull in demand, market sources said on Wednesday.

On 8 July, POM prices were assessed at $1,350-1,500/tonne CIF (cost, insurance and freight) China, unchanged from the previous week, according to ICIS data.

Market players continue to take on a cautious stance, given uncertainty in demand from the automotive industry – a key downstream market for POM.

There were expectations that demand will pick up from September in China, ahead of the country’s National Day celebration in the first week of October, but car inventory at manufacturing plants are currently high, market sources said.

Sale of POM cargoes to original equipment manufacturers (OEMs) of cars are typically minimal.

Asia POM producers typically generate 50% of revenue from downstream automotive products such as car doors, windows, windscreens, seats, among others. The market may come under strong downward pressure if car sales continue to fall month on month in China.

From the electronics sector, a second key downstream for POM, demand is expected to remain strong, especially in Taiwan, potentially offsetting the weakness in consumption of automotive products, market sources said.

Taiwan’s domestic market is absorbing more POM, making up for the decline in spot export volumes to the key China market, a Taiwan-based producer said. 

Expectations that overall operating rates of China’s domestic POM plants will increase in end-July have also been weighing on market sentiment amid weak demand, industry sources said.

China’s POM plants are running at an average rate of 46% this week, down from 54% from a week ago because of two plant turnarounds.

These plants are expected to restart by early August and overall supply in China’s domestic market will then increase by around 10-20%, traders said.

Some traders in China are still purchasing their required POM quantities, stocking up on their inventories ahead of September, when demand is expected to pick up.

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By Trixie Yap