Asia petrochemicals tumble on crude losses; market players wary
Pearl Bantillo
15-Oct-2014
Focus story by
Pearl Bantillo
SINGAPORE (ICIS)–Asia’s petrochemical markets
are being battered on Wednesday following hefty losses in
crude futures, with most market players wary that commodities
prices will keep falling in the near term amid global
economic weakness.
At midday, NYMEX light sweet crude for November
delivery was trading slightly higher at $82.08/bbl
after tumbling nearly $4/bbl overnight.
Crude prices slumped at the close of trade on Tuesday to
$81.84/bbl after the International Energy Agency (IEA) cut
its oil demand forecast for 2014 and 2015, while reporting
that global oil supplies in September increased a huge 2.8m
bbl/day year on year.
Oil prices have been on a downward spiral as concerns over
weakening global demand heightened following cuts in growth
forecasts by the International Monetary Fund (IMF) on 7
October, affecting sentiment in the overall petrochemical
markets.
Naphtha and aromatics markets are particularly susceptible to the
apparent free-fall in crude prices.
At midday, open-spec second-half November naphtha prices fell
$23.50-24.50/tonne to $715.50-718.50/tonne CFR Japan.
Benzene shed $35/tonne to $1,060-1,065/tonne FOB (free on
board) Korea, while toluene fell $22-23/tonne to
$932-939/tonne FOB Korea at noon.
Styrene monomer (SM) prices, meanwhile, fell below $1,400/tonne CFR (cost
and freight) China for December cargoes this week, with talk
of a deal done at $1,380/tonne, market sources said.
November SM parcels were discussed at around $1,400/tonne CFR
China.
On 10 October, spot SM prices were assessed at
$1,495-1,510/tonne CFR China, according to ICIS data.
Market players expect SM prices to continue falling, dragged
down by weak energy futures and benzene prices.
Most buyers in the polyester chain took to the sidelines,
adopting a cautious stance amid declining prices in the
upstream markets, market participants said.
Purchases were mainly done on a need-to basis, as majority of
buyers are expecting prices to fall further given prevailing
weakness in the global macroeconomic conditions, they
said.
The global economy is projected to grow at a slower pace of
3.3% this year and at a 3.8% pace in 2015, according to the
IMF – a global financial stability watchdog.
The IMF pointed to stagnation and low potential growth in
advanced economies and a decline in potential growth in
emerging markets as medium-term risks to global growth.
Sources in the petrochemical industry warned of a build-up in
inventory, particularly for purified terephthalic acid (PTA),
with not much improvement in downstream demand.
“An oversupplied PTA market, together with a bearish upstream
market might continue to add a downward pressure on spot
prices,” a Chinese trader said.
Further downstream, the nylon chip market is also feeling
indirect pressure from slumping crude prices. Market players
are taking a wait-and-see stance because of tumbling prices
of benzene and capro in the Chinese domestic market.
Although buyers have low stocks on hand, purchases of nylon
chips are being limited to small quantities given
expectations that prices will continue to fall. They would
not want to be caught holding on to stockpiles of high-priced
cargoes at their warehouses, industry sources said.
On 14 October, nylon chip prices fell by $50-60/tonnes week
on week to $2,400-2,440/tonne CFR China, according to ICIS
data.
In the olefins markets,
butadiene (BD) prices tumbled on Wednesday, with
offers tumbling to $1,200-1,250/tonne CFR NE Asia, as the
sharp fall in crude prices sent traders scrambling to offload
stocks.
“Demand is falling while supply is ample. And with crude
prices so weak, buying ideas for BD have fallen to around
$1,150/tonne CFR NE Asia,” a downstream synthetic rubber
producer said.
Ethylene and propylene prices, on the other hand, held steady
at midday.
Selling ideas for ethylene were mainly at least in the
low-$1,400/tonne CFR NE Asia levels, against buying ideas
largely below $1,400/tonne CFR NE Asia.
For propylene, selling ideas of $1,315-1,320/tonne CFR NE
Asia for November-arrival drew limited buying interest.
Additional reporting by Ong Sheau Ling, Helen Yan, Clive
Ong, Tahir Ikram, Felicia Loo, James Dennis, Yeow Pei Lin,
Daphne Ho and Samuel Wong
Read John Richardson and Malini Hariharan’s blog –
Asian Chemical Connections
Global News + ICIS Chemical Business (ICB)
See the full picture, with unlimited access to ICIS chemicals news across all markets and regions, plus ICB, the industry-leading magazine for the chemicals industry.
Contact us
Now, more than ever, dynamic insights are key to navigating complex, volatile commodity markets. Access to expert insights on the latest industry developments and tracking market changes are vital in making sustainable business decisions.
Want to learn about how we can work together to bring you actionable insight and support your business decisions?
Need Help?