Asian Monomers Retreat Under the Influence of Crude, Holidays
Feb 09, 2010
In Asia, spot prices for most monomers are in retreat in the final week before the Chinese New Year holidays, as the holiday lull in Asian demand as well as softening crude oil prices have combined to pull down monomers prices across the region. After briefly rising above the $77/barrel mark earlier last week, crude oil futures on the NYMEX ended the week at $71.19/barrel on February 5, a drop of slightly more than $6/barrel over the course of just three days which brought crude futures to their lowest point since December of 2009. Among the factors cited as reasons for the slip in crude oil prices were concerns regarding a possible sovereign credit crisis in European states such as Greece and Spain as well as weaker US equity markets following the US Labor Department’s announcement of disappointing employment figures for the fourth quarter of 2009. In line with the drop in crude oil futures, spot naphtha prices fell $31/ton on the final trading day of the past week to reach $677/ton CFR Japan.
The drop in crude oil futures as well as concerns over the strength of the global economy, when combined with the slowing demand effects of the rapidly approaching Chinese New Year holidays have resulted in weaker spot monomers prices across the Asian region. Spot ethylene prices, which had been tracking a firm trend since mid-January in spite of sluggish PE demand, lost $30/ton over the course of the past week as sellers elected to reduce their offer levels in the face of weak demand from key markets such as China and Taiwan. Spot propylene prices, which had been hovering at high levels since mid-January in defiance of lackluster PP demand, also began moving back towards their early year levels, shedding $20/ton on the week. Sources pointed to a lack of buying interest as well in the region along with discouraging global economic news as the factors weighing down the market.
In the VCM feedstock market, major Japanese producers were reported to have lowered their February offers by $20/ton from their initial targets, although buyers are said to be holding out for additional discounts. Bearish market sentiment in China’s domestic PVC market due to the pre-holiday drop off in demand was also cited as a factor supporting the downward drift in prices. Finally, spot styrene prices in Asia also began to show some weakness towards the end of last week, shedding $10/ton on the final trading day of the week as lower crude oil prices and higher than normal inventory levels inside China drove buyers to the sidelines.
