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Asian polymer markets unfazed by crude oil rally

by Pınar Polat - ppolat@chemorbis.com
by Merve Sezgün - msezgun@chemorbis.com
  • 04/06/2021 (08:44)
Import prices for most polymers in Asia have continued their downturn this week, defying the oil rally. Overall sentiment has remained weak across regional countries mostly due to mounting concerns over demand hit by the resurgence of COVID-19 particularly in Southeast Asia and India.

Brent crude breached the $70 mark earlier this week and remained above it at the time of writing. The rally has mainly been driven by a combination of lower stocks in the US and the expectations that oil demand will grow over the near-term.

According to ChemOrbis Price Wizard data, the weekly average of Brent futures prices has hit a two-year high.

“Sentiment in the polymer markets continues to be weighed down by pandemic-hit regional demand. Southeast Asian countries have tried to manage their COVID-19 spikes through lockdowns, which have not aided markets’ recovery. Taiwan and Japan have also struggled to contain their rising coronavirus infections. Prices are mostly lower and not impacted by the stronger crude,” noted a Singapore-based trader.

PP, PE, PS, and ABS prices have extended their losses into this week while PVC and PET bottle prices have not seen major changes so far. However, players concurred that sentiment in all markets remained fragile due to unpromising demand.

Import homo-PP prices fall to 4-month low in China, SEA

Import PP prices in China and Southeast Asia have been steadily declining since mid-March and the recent crude oil rally has failed to put a cap on further drops this week.

According to data from ChemOrbis Price Index, the weekly averages of CIF China /SEA prices have declined to an almost four-month low this week.

Meanwhile, import raffia prices in China have broken below the $1100/ton CIF threshold. The last time import homo-PP raffia and inj. offers stood below this threshold was early February, right before the start of the Lunar New Year holidays, meanwhile.

“Defying stronger energy values, prices have remained under downward pressure from limited demand coupled with oversupply pressure amid new plant start-ups,” explained a few traders in China.

PE downturn also persists; LDPE sees sharper drops

Similar to PP, import PE prices in China and Southeast Asia have been on a steady decline since mid-March, with LDPE prices witnessing the sharpest declines among other grades.

According to ChemOrbis data, LDPE film offers below the $1200/ton CIF China basis threshold have appeared in the market this week. Prices have posted a cumulative loss of $380/ton on average in China and $300/ton in Southeast Asia since the downtrend kicked off, data also reveal.

When it comes to HDPE and LLDPE film, prices have retreated further to reach their lowest levels since early February on average.

Concerns over rising supply amid new plants coming on stream as well as plant restarts have added to the weak demand conditions considering the traditional off-season in China, and the resurgence of Covid in the region. These factors have overshadowed the impact of rising crude oil futures so far, players concurred.

PS, ABS markets witness further losses

Import PS and ABS prices have extended losses owing to increasing demand concerns amid the coronavirus resurgences across Southeast Asia, India and now higher infections affecting Taiwan and Japan as well.

“Prices have remained on the soft side this week despite rising oil futures. Buyers have continued to limit their purchases based on their needs,” a trader in Indonesia said.

The latest round of price cuts were attributed to weaker demand from the pandemic-hit regions, particularly from the countries which have tightened Covid restrictions. Malaysia has implemented a nationwide lockdown from June 1-14 while Vietnam has further tightened restrictions to combat the rising COVID-19 cases.

Import PVC largely stable after weeks of declines, but sentiment still weak

Import PVC prices on CIF China/India/Southeast Asia basis have not recorded much changes this week since most players concluded their June deals with three-digit decreases last week.

Players noted that bullish crude oil futures underpinned the low ends of the overall price ranges. However, pandemic-hit demand hindered any hike attempts.

Market sentiment in China turned slightly positive amid the strong crude rebound. “There might be a price cap on the downside. However, Covid related demand concerns will persist through the year. Into the second half of the year, there will likely be deep-sea, ex-USG cargo arrivals into Asia, albeit at less than the usual volumes, given the fall in regional demand. This will add further downward pressure on PVC prices,” said a trader.

Local prices in India and most Southeast Asian countries, meanwhile, witnessed additional declines in the face of reduced demand.

Firmer oil overshadowed by demand concerns in PET markets

PET bottle prices in Asian markets have also been largely stable after several weeks of declines. However, players shared similar comments about demand and the general market sentiment.

“Demand in Southeast Asia is quite weak since many cities have gone under full lockdown. Converters in the locked-down areas are either shutting down their factories, or reducing operating rates. Demand towards finished products has also declined since people stay at home and consume less,” sellers reported.

China’s Dalian futures give limited response to crude, meanwhile

Contrary to traditional patterns, Dalian futures have been volatile recently despite oil’s strong performance. This limited impact has been mostly attributed to the Chinese government’s intervention in commodity markets to curb “excessive speculation” and lower inflation risks. China’s State Council has promised tougher oversight of commodity markets, so that high commodity prices would not be passed through to small businesses and end users.

The price control system has restrained the upward pressure of higher energy values, leading to fluctuations in futures rather than a sharp reflection of strength.
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