Price slide intensifies

By Malini Hariharan

The weakness in Asian markets is spreading with steep drops also being reported in olefin prices.

Ethylene prices dropped by $160-170/tonnes last week while propylene declined $90-110/tonne, writes my colleague Soo Hwee, ICIS pricing editor for olefins.

The poor market conditions were attributed to softness in crude oil and naphtha prices as well as lack of support from polyolefins that are also under pressure. Nervousness about Europe and the impact of credit tightening in China have also played a role.

Buyers have strategically moved to the sidelines in anticipation of further reduction in prices while cracker operators have started talking about operating rate cuts if economics continue to weaken.

What happens in the Chinese polymer market over the next few days will be crucial. As reported by the blog last week, stocks with major producers have climbed close to record levels. And export offers are still being heard.

An Indian trader said this morning that he has received offers from China for high-density polyethylene (hdPE) at $1200/tonne cfr India, $1230/tonne cfr India for linear-low density PE (lldPE) and $1430/tonne cfr India for low-density PE (ldPE).

The trader has not yet signed any deals but the offers have turned out to be useful for bargaining with his regular suppliers.

“They [traders] know they can always manipulate prices the moment something goes wrong. The events of 2008 has spoilt the market; producers could earlier take a firm stance but that does not work now,” said a frustrated international producer.

The Indian polymer market is broadly following the direction set by China but price drops so far have not been as substantial.

“Arrivals [of imported cargoes] have been low and producers do not have much stocks,” explained the trader.

But it could just be a matter of time before Indian prices catch up with those in China.

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