Price and market trends: Asia PS sellers target higher prices but demand stagnant

04 April 2014 09:33 Source:ICIS Chemical Business

Chinese exports are flat whilst downstream demand in the region remains tepid

Asia’s polystyrene (PS) producers raised their offers this week in a bid to achieve better margins, but persistently weak demand in the region has dampened sellers’ price hike initiatives to some degree.

With feedstock styrene monomer (SM) prices hovering at above $1,600/tonne CFR (cost & freight) China, some PS makers raised offers by $10-20/tonne to around $1,800/tonne CFR China and above.

Demand in the region, meanwhile, continued to be weak as orders for finished goods received by end-users of resins remained lower than expected.

“So far the orders we received are below expectations, hence we will not be purchasing larger volumes in the near term,” said an end-user in China.

With the Chinese exports sector still in the doldrums, the central bank has weakened the yuan since the middle of February to stimulate the exports sector. However, exports has not felt its effects yet.

“It will probably take some time before the exports sector see any positive impact from a weaker currency; most likely in the second half of the year,” said a trader in Hong Kong.

While the exports sector could be a beneficiary of the weaker yuan, the policy of currency depreciation is at least two-pronged. The deviation from the past years of gradual appreciation could also be to discourage hot money flows into China.

“While the government is trying to stimulate exports, it is also tightening the credit market to prevent any financial bubbles, hence the resin trade is also affected by this tightening,” said a producer in Taiwan.

Offers of expandable PS (EPS) were largely stable that week in the low $1,800s/tonne CFR NE (northeast) Asia but deals remained below $1,800/tonne CFR NE Asia.

“Suppliers are thinking of higher prices but most have decided against any hefty increase as demand is weak,” said a distributor in southeast Asia.

By Clive Ong