Focus story by Eric Su
SINGAPORE (ICIS)--Spot bisphenol-A (BPA) prices in China may continue rising after hitting a one-year high, driven by a persistent lack of cargoes in the domestic market, industry sources said on Thursday.
Other market participants, however, are less bullish, saying prices may have reached a ceiling given stable-to-soft demand.
On 18 July, BPA spot prices were assessed at $1,780-1,820/tonne CFR (cost and freight) China, up by $45/tonne from the previous week, according to ICIS data.
Compared with levels in the previous four weeks, prices have gone up by an average of $90/tonne or 5.3%, the data showed.
Sellers hiked their offers last week despite a stable-to-soft demand, a Chinese trader said.
Offers have started rising since the start of the month and this trend is likely to continue in the near term since there is no clear indication when supply will ease, some market sources said.
Delays in restarting a 150,000 tonne/year BPA plant in Beijing, China, in June partly triggered the increase in offers. The plant, which was supposed to resume production early last month, has remained shut this week.
“The delay in restart was like adding fuel to fire,” a Chinese trader said in Mandarin.
Meanwhile, a 90,000 tonne/year facility in Jiangsu – operated by Nantong Xingchen Synthetic Material – is due for turnaround in early August.
Since the start of the year, most BPA producers in Asia have been running their plants at reduced capacity and keeping low inventory of the product because of low profitability and squeezed margins, a second Chinese trader said.
This led to reduced BPA imports from China starting February. In the first five months of 2014, the country's average monthly BPA imports stood at around 34,000 tonnes, compared with the monthly average of above 45,000 tonnes for the whole of 2013, official data showed.
A number of buyers retreated to the sidelines when offers spiked, another trader said.
Epoxy resin and polycarbonate (PC) producers – two major downstream sectors of BPA – have been facing increasingly squeezed margins as feedstock prices have spiralled upwards over the past months, as they were unable to pass on the increase in cost to their buyers.
Negotiations for BPA cargoes have been very difficult because of the wide gap between buying and selling ideas, according to an epoxy resins producer.
Smaller epoxy resin manufacturers, which procure BPA in the spot market, were heard to have temporarily shut down operations because of high costs of BPA, a northeast Asian BPA producer said.
Meanwhile, major epoxy producers might consider further reducing run rates or go for a turnaround if prices continue to rise and the resultant cost pressure becomes unbearable, industry sources said.
The sharp price increase and volatility of the BPA market might be detrimental to BPA producers in the long run, particularly, when the rise is based on sentiment and not market fundamentals, some industry participants said.
BPA prices might fall just as fast, which sometimes happens after sudden big surge in prices, said a northeast Asia-based BPA producer. Furthermore, higher prices might not be beneficial if they lead to a sharp decline in sales volumes, the northeast Asian BPA producer said.
Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections