Plastic Monthly（No 35） A Falling Market - Skate on Thin Ice 2013 Author: Kim Lin-Marketing Date: 2nd April 2013 Site: www.sunta.hk Sunta Chemical Limited★Plastic Monthly Report All rights reserved. Reproduction of articles is welcomed as long as credit is duly given to Marketing Department of Sunta Chemical Ltd Plastic Monthly 35 - A Falling Market - Skate on Thin Ice 1 Table of Contents Plastic Market in March – A Recap ............................................ 2 International Oil Price（WTI）——A Rebound ............................... 2 Upstream monomers: Stable Despite Falling ................................. 3 Plastic raw material market——Downward adjustment ........................ 4 Summary of March .............................................................. 6 The Plastic Market Forecast of April 2013 ..................................... 9 Plastic Materials Market – Small Volatility .............................. 9 Appendix—Major Events ....................................................... 11 Sunta Chemical Limited★Plastic Monthly Report All rights reserved. Reproduction of articles is welcomed as long as credit is duly given to Marketing Department of Sunta Chemical Ltd Plastic Monthly 35 - A Falling Market - Skate on Thin Ice 2 Plastic Market in March – A Recap International Oil Price（WTI）——A Rebound Figure 1: International Oil Price（Jan – Mar 2013） Source: NYMEX After experiencing a high level in February, the International Oil Price reached a low point of USD90.12 in March, when President Obama officially announced a comprehensive spend cut of government expenditure. It affected the oil price negatively. When it comes to mid and late March, there were 2 waves of rising oil price. The Spanish government overfulfilled the established bond auction target. The oil price increased to USD93.74 in the first rising wave. Later, the Cypriot government announced an unprecedented taxation plan on public saving. The Oil Price dropped by USD1.58 within a day to USD92.16, making it the starting point of the second rising wave. After the country reached a bailout agreement with international financial institutions, with the announcement that the US Fed maintained the current quantity easing policy, the oil price rose to USD97.23. The average International Oil Price in March was USD93.07, a fall of USD2.49 from the February average of USD95.56. Feb Average USD95.56 Mar Average USD93.07 Sunta Chemical Limited★Plastic Monthly Report All rights reserved. Reproduction of articles is welcomed as long as credit is duly given to Marketing Department of Sunta Chemical Ltd Plastic Monthly 35 - A Falling Market - Skate on Thin Ice 3 Upstream monomers: Stable Despite Falling Figure 2: Upstream Monomers（Jan – Mar 2013） Source: Chem99 Source: Chem99 In March, the trend of SM (Styrene) and C3 (Propylene) are highly correlated. It fell slightly based on stability. SM fell by USD86 with an average of USD1634, while C3 fell by USD71, with an average of USD1286. At the same time, the stability of C3 has also supported the stable cost of AN (Acrylonitrile). The trend is relatively more moderate. The average of the month was USD1994, a USD5 increase from last month’s average of USD1989. The price of BD fell continuously. The price in early March was USD2080. It fell to USD1725 in mid-March, approaching the nearest historical low of USD1455. In late SM: Feb Average USD1720 Mar Average USD1634 Mar Average USD1286 Sunta Chemical Limited★Plastic Monthly Report All rights reserved. Reproduction of articles is welcomed as long as credit is duly given to Marketing Department of Sunta Chemical Ltd Plastic Monthly 35 - A Falling Market - Skate on Thin Ice 4 March, it fell to USD1470. The month’s average was USD1783, falling by USD215 from last month’s average of USD1998. Plastic raw material market——Downward adjustment ABS Figure 3: The Comparison of spot price and cost in an ABS market（Jan 2013 - March） Source: HK Traders The cost of ABS in the graph is 0.6*SM（Styrene）+0.25*AN（Acrylonitrile）+0.15*BD（Butadiene）+US$300 It hasn’t included expenses like terminal handling charges. ABS reached a 3 month high in February. It fell steadily in March. A mainstream brand of ABS in early March was USD2034. A support was formed at USD1950 and the price went steadily till the end of the month. The cost also fell, but it was still higher than the spot price by USD28 after falling. The average market price throughout the month was USD1966, falling by USD84 from February’s average of USD2050. PS Figure 4: The comparison of spot price and production cost in a GPPS market（2013 Jan - Mar） Sunta Chemical Limited★Plastic Monthly Report All rights reserved. Reproduction of articles is welcomed as long as credit is duly given to Marketing Department of Sunta Chemical Ltd Plastic Monthly 35 - A Falling Market - Skate on Thin Ice 5 Source: Hong Kong Traders The cost of GPPS in the graph is SM（Styrene）+US$120 It hasn’t included expenses like terminal handling charges. Under the prerequisite of falling production cost, GPPS also went downward slightly in March. A mainstream brand of GPPS was quoted USD1903 in early March. It remained stable at USD1832, but there is a larger decrease than 2 months ago. The production cost fell from USD1806 to USD1712 in early March. It remained stable in Mid March and went upward slightly in late March. Generally speaking, the average spot price in March was USD1850, higher than the production cost by USD96. PP Figure 5: The comparison of spot price and production cost in a HOMO PP market（2013 Jan – Mar） Source: Hong Kong Traders -USD80 +USD50 Sunta Chemical Limited★Plastic Monthly Report All rights reserved. Reproduction of articles is welcomed as long as credit is duly given to Marketing Department of Sunta Chemical Ltd Plastic Monthly 35 - A Falling Market - Skate on Thin Ice 6 The cost of HOMO PP in the figure is calculated by C3（Propylene）+US$120. It hasn’t included expenses like terminal handling charges. HOMO PP remained stable in March as in February. A brand was quoted at USD1521 in early March. It was USD1494 at the end of March, falling slightly by USD27. Comparatively speaking, the stage performance of production cost was explicit. It was falling before Mid march, falling by USD80. In late March, it rose by around USD50. Generally speaking, the cost has fallen by USD71 from last month, while the average market price has fallen by USD165 to USD1497 from last month’s average of USD1662. Summary of March International Oil Price（WTI） At the beginning of the month, US President Obama announced that the USD85 billion auto spend cut was in effect. WTI remained falling, and it fell from the high point in Mid-Feb by 7.58% At the same time, as the demand peak in summer is approaching, the OPEC export shipment volume in March has increased. The market expects the demand to be stable. Later, the US Fed announced it would maintain the monetary policy of USD 85 billion monthly purchase of mortgage-backed securities and government bonds. Oil price rose consecutively for 3 times. In late March, Cyprus announced the unprecedented taxation plan on public saving to fight for a bailout plan from the EU. She is also adjusting the taxation arrangement. The USD90.68 USD92.96 USD94.81 The Cypriot president reached a bailout plan of 10 billion Euro with EU on 26th March. The Fed bought the USD 85 billion mortgage-backed securities and government bonds monthly on 21st March.. The USD85 trillion auto spend cut was in effect of 2nd March. Sunta Chemical Limited★Plastic Monthly Report All rights reserved. Reproduction of articles is welcomed as long as credit is duly given to Marketing Department of Sunta Chemical Ltd Plastic Monthly 35 - A Falling Market - Skate on Thin Ice 7 problem of Eurozone affected the market atmosphere. Throughout March, WTI adjusted slightly around USD90 under the influence of above factors. The monthly average was USD93.07, falling by USD2.49 from February’s average of USD95.56. Upstream monomers The first quarter belonged to the peak season of monomer plant overhaul theoretically. The reduced supply should cause the monomer prices to rise. However, as shown in March, the price is affected by the downstream demand rather than the supply. Cyclopropane and Ring chlorine, the downstream derivatives of C3 (propylene) mainly consumes the stock after the Lunar New Year. Following the slight falling of downstream material C3 (Propylene), the price difference between Propylene and Polypropylene enlarges. Propylene remained stable and fell at times. Benzene, the material of SM (styrene) and ethylene continued to fall and relieved the cost pressure. The sport price of North East Asian Ethylene, for example, fell to a 3 month low because of the weak demand for downstream polyethylene (PE) derivatives. Benzene also reached a 19-week low due to weak demand in the US and China. In Asia, the Benzene price was around USD1,315 to 1,320 in the first half of April. March average: USD1,286/ton.The poor demand of downstream product cyclopropane ring chlorine dragged propylene price down. March average: USD1,634/ton. The Northeast Asian ethylene spot grid fell to the lowest in three months, Benzene in Asia hit a 19-week low. March average: USD1,994/ton. The price of raw material propylene fell, resulting the acrylonitrile cost reduction. March average: USD1,783/ton. As the tapping period is approaching, the downstream tire industry maintained a wait-to-see atmosphere. The trend of synthetic rubber was weak. Sunta Chemical Limited★Plastic Monthly Report All rights reserved. Reproduction of articles is welcomed as long as credit is duly given to Marketing Department of Sunta Chemical Ltd Plastic Monthly 35 - A Falling Market - Skate on Thin Ice 8 The price of Propylene, the raw material of AN (Acrylonitrile) fell. The cost of Acrylonitrile reduced. In Asia market, the operation rate was hindered by the overhauls of some equipment. The rate of falling was not significant due to a weak demand in March. The downstream tire industry of BD (butadiene) maintained a strong waiting-to-see atmosphere. As natural rubber entered the rich production period in April, the supply will increase, resulting the price of synthetic rubber, the raw material of Butadiene continued to fall before the tapping in March,. Plastic raw material market The plastic market in March changed from the rising last year to a stable downward adjustment. Supported by a high cost, the opening price of ABS plant remained unchanged in the middle of the month. However, it was still lower than the production cost. As the market supply was more concentrated after the Lunar New Year, and the return of workers to the plants was unfavourable, the operation rate is lower. The demand is refrained and the price went down. The price of PS went down steadily. However, the supply of some models is intense on spot and there will be no supply until early or mid April. The price is sill higher than the production cost. As the price difference between ex-factory price and market Percentage change in March: -4.1%. In the middle of the month, the ex-factory price of plants remained unchanged and was still lower than the production cost. The spot price is lower than the cost as well, leading to an ‘upside down’ price. Percentage change in March: -3.1%. Some models face short supply. The spot price is higher than production cost. Percentage change in March: -10%.In the middle of the month, the RMB market quote is higher than the USD market The lower cost goods in Hong Kong were shippted to Mainland. The supply of USD market was gradually consumed. Sunta Chemical Limited★Plastic Monthly Report All rights reserved. Reproduction of articles is welcomed as long as credit is duly given to Marketing Department of Sunta Chemical Ltd Plastic Monthly 35 - A Falling Market - Skate on Thin Ice 9 price is significant, the degree of downward trend isn’t large. The spot price of PP in mid-March was lower than the quote of plants by around USD50. The market price was increased by the Mainland chemical plants by RMB200/tones, leading to the directly proportion of RMB and USD in the market. The lower priced goods in Hong Kong went to Mainland. The supply of USD market was gradually consumed. The price remained steady and rose slightly at time. Generally speaking, the price went down from the price of last month. The Plastic Market Forecast of April 2013 Plastic Materials Market – Small Volatility The performance of plastic material market declined in general due to falling production cost and insignificant demand. How may the market change when it comes to April, facing the Easter Holiday and the coming Labour Day holiday? The cost of PS is affected by SM (Styrene). SM fell from the high point in March. Comparing with the increase accumulated in the second half of 2013, the slight downward adjustment is still acceptable. Tracing back to the WTI, which is affected AN BD SM C3 The poor demand for PMMA, which is used for the production of flat-panel TV cabinet, pulled down the AN demand. Also, the falling upstream raw material C3 drove down the cost of AN. AN is prone to a decrease of USD200-400 in April. After the fall in March, the price returned to the same level as in January and the trend remained stable. Supported by oil price in April, the production cost is likely to remain stable and rise at times. The Euro Debt Crisis hasn’t had significant impact. The oil price showed signs of steady rise in April. SM is expected to be steady in April. The price is close to the historic low. April is the peak season of natural rubber production. The demand for synthetic rubber is hindered. The poor tire industry may prompt the price to go down slightly again, but it is very likely that a support is formed around USD1450. Sunta Chemical Limited★Plastic Monthly Report All rights reserved. Reproduction of articles is welcomed as long as credit is duly given to Marketing Department of Sunta Chemical Ltd Plastic Monthly 35 - A Falling Market - Skate on Thin Ice 10 by Euro Debt, the frequent volatility variance still exists. Currently, the unfavourable effect of Euro Debt Crisis is not significant. The oil price shows signs of slight increase in April. SM is expected to be steady in April. As the production cost is stable, let us pay attention to the market supply and demand. The market demand for PS has not been huge, and the production volume of plants is not huge either. The supply and demand is relatively more balanced. The price of PS is expected to be stable in April. For ABS, its cost is affected by SM, AN (Acrylonitrile) and BD (Butadiene). PMMA, another plastic product using AN as production materials, is mainly used for producing plat-panel TV cabinet. After the Lunar New Year holiday, the sale volume of flat-panel TV cabinet stagnated. The demand for AN is pulled down. Also, as the price of upstream monomer C3 (Propylene) fell, the cost of AN is dragged down. AN thus is prone to a fall of USD200-400. BD has fallen to USD1470 at the end of March, very close to the nearest historical low of USD1455. (8th December 2013) (as described in No.33 Monthly Report) April is the peak season of natural rubber production. The demand for natural rubber is hindered. It will fall slightly as the tire industry is poor, but a support is very likely to form at around USD1450. Combining the above factors, there is a USD60 downward adjustment space for the production cost of ABS. After the Easter holiday, there maybe a small wave of booming demand and may push the market price up. At the end of the month when Labour Day Holiday approaches, the demand will fall and the price may fall as well. However, during the falling in March, agents replenished little and the volume in the market isn’t large. The room for the price to fall is very limited. Also, to avoid losses, plants may limit their production. In April, ABS will fluctuate slightly mainly. C3 (Propylene), the upstream monomer of PP fell slighltly in March. The price is similar to the price in January after the fall and the trend is steady. Under the support of oil price in April, the production cost is very likely to be steady and Sunta Chemical Limited★Plastic Monthly Report All rights reserved. Reproduction of articles is welcomed as long as credit is duly given to Marketing Department of Sunta Chemical Ltd Plastic Monthly 35 - A Falling Market - Skate on Thin Ice 11 may rise at times. Among HOMO、BLOCK and RANDOM PP, the production volume of BLOCK PP is larger than the other two. Its price is more likely to go down as it is more prone to excess supply. Also, the PP replenishment in Saudi Arabia may hit the price too. However, at the same time, there will be houseware fairs and gift fairs in April. The concentrated orders may heat the market atmosphere up and bring the PP price up. Appendix—Major Events 4th March 2013 Obama announced a comprehensive spend cut. The government authorities will reduce the expenditure by USD85 billion. 5th March 2013 The Styrene market in Asia fell drastically by USD67/ton. The FOB Korea pure Benzene fell by USD33/ton. 21st March 2013 The US Fed continued with the monthly bond purchase of USD85 billion. 26th March 2013 The Cypriot President reached a 10 billion Euro bailout plan with the EU. ～The End～ Sunta Chemical Limited★Plastic Monthly Report All rights reserved. Reproduction of articles is welcomed as long as credit is duly given to Marketing Department of Sunta Chemical Ltd Plastic Monthly 35 - A Falling Market - Skate on Thin Ice 12 Our Plastic Market Report is mainly to promote the market interactions among customers and provide reference information related to the market trend to customers. Also, we also pay attention to the communication and interaction between different enterprises. We welcome the enterprises which are interested in discussing the market to contact us and strive for promoting exchanges jointly. 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