Asia polymer makers eye price hike on China, C2/C3 firming

Focus article by Tahir Ikram

SINGAPORE (ICIS)–Asian polymer producers are holding back on offers as they are expecting an uptrend in the market on the back of firmer ethylene and propylene prices and as the key China market resumes normal business following the Lunar New Year holiday, market sources said on Wednesday.

Ethylene prices are expected to rise in the near term as a result of supply tightness in the market which has been weighed by fewer exports from the Middle East amid feedstock issues and cracker turnarounds, they said.

Several cracker turnarounds in South Korea and Japan which are scheduled in the next couple of months will further increase the supply tightness in the market, according to market sources.

Some ethylene end-users have raised their buying ideas to $970/tonne CFR NE Asia for March delivery, up from the $940-960/tonne CFR NE Asia range published for the week to 13 February.

Similarly, propylene prices have risen amid limited supply from South Korea where a number of producers have no spot availability in the second quarter due to upcoming turnarounds at their crackers and refineries during the March-June period. 

Prices were assessed at $950-970/tonne CFR NE Asia on 24 February, up from the $850-925/tonne CFR NE Asia level published for the week ended 13 February. 

Meanwhile, downstream polyethylene (PE) producers were holding on offers earlier this week for March because of the absence of Chinese players in the market due to the Lunar New Year holidays from 18-22 February. Full resumption of business is expected by the end of this week.

In southeast (SE) Asia, there is some supply tightness for PE because of regional shutdowns, sources said.

Despite the recent slides in crude oil prices, players feel that prices have already bottomed out and this will result in a rebound in PE prices.

Market players which had been buying hand to mouth from last year have been holding on to low inventories and will have to restock soon, sources added.

Similar sentiment prevail in the Middle East polymer markets, with most players waiting for China to come back from the Lunar New Year break to get a clearer direction of the market, industry sources said.

Middle East producers are low on stock and there is tight supply for PE and polypropylene (PP) cargoes, they added.

Producers and converters are also concerned about higher monomer prices and feel that their prices have already bottomed out so a hike in offers is due, they said.

Demand for PE and PP in Pakistan and India is also improving significantly as buyers indicated a renewed willingness to procure spot cargoes after months of weak sentiment.

A Pakistani-based buyer said producers are increasing PP offers week-on-week by at least $50/tonne amid increased enquiries and demand.

In the related polyvinyl chloride (PVC) market, prices are climbing up in Asia as buyers are accepting higher offers because of rising ethylene prices.

Northeast Asia producers have also indicated strong demand from India as buyers restock their inventories after making small purchases in the fourth quarter of last year.

For the southeast Asia market, sellers were seen offering higher prices but some cautioned that firming ethylene-based PVC prices will give room for carbide-based PVC to re-enter the market.

In India, PVC players expect a rebound as sellers try to recoup losses incurred in the previous months. 

The Indian PVC market which saw limited trade in the previous week owing to the Lunar New Year holiday at producer facilities is likely to see higher offers for imports in the following weeks.

Although a bulk of the PVC shipments for March was sold out in the previous weeks, several sellers held back some volumes to offer at higher prices.

PVC prices in India were assessed at $900-910/tonne CFR India in the week ended 23 February, up $10/tonne at the low end, as traders began offering cargoes at higher prices. These were purchased in the previous weeks from producers at lower prices.

An absence of lower-priced cargoes have nudged prices up despite largely limited downstream demand from the infrastructure as well as agriculture sectors.

Producers are willing to accept higher offers, while market players are not buying until they see how the Chinese market set their direction later this week or early in March.

In line with other polymers, polystyrene (PS) producers in southeast Asia targeted prices at around $1,250/tonne CFR this week, around $20-30/tonne higher than before the Lunar New Year holidays.

Interest was heard to be firm as some buyers wanted to stock up resins in case prices increase further. 

Market players also expect stronger demand out of China in the near term as manufacturing activities in China usually picks up in the second quarter and spur demand for resins.

Meanwhile, ethylene vinyl acetate (EVA) resin prices in Asia may extend gains in March, when peak demand season is expected to kick in, with further support from gains in the upstream crude, naphtha and feedstock ethylene markets.

Additional reporting by Yeow Pei Lin, Arianne Perez, Muhamad Fadhil, Kite Chong, Veena Pathare, Helen Lee and Clive Ong

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