2015-05
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Table of Content
Chapter 1: Plastic Market in April 2015 3
1.1 International Oil Price (WTI) –Reaching USD60 temporarily 3
1.2 Upstream Monomers – Variations in rise and fall 4
1.3 Plastic Raw Materials Market – One falls another rises 7
Chapter 2: Plastic Market Forecast inJune 2015 10
2.1 Imports of ABS/PS/PP 10
2.2 Global economy – Gentle development 12
2.3 Plastic market forecast 13
Chapter 3: Summary–Take in in low position 14
Chapter 4:Appendix-Major Events 15
Chapter 1: Plastic Market in April 2015
1.1 International Oil Price (WTI) –Reaching USD60 temporarily
Figure 1：International Oil Price (WTI)（Mar-May 2015）
Source:NYMEX
Table 1：WTIfluctuation (Apr-May2015)
Apr 2015 average May 2015 average May Vs Apr 2015
WTI USD54.41 USD59.32 ↑9.0%
In May, the international oil price has increased 9%, which also first broke through USD60 since November 2014. Creating a new high in recent half year, the highest point was USD60.93.
There were two major factors driving the growth of the oil price in May:
Seasonal demand increased. In America, the peak season of driving trip has begun. According to American Automobile Association, the number of road trip tourists has reached the highest in ten years during the holiday in May. This peak implied the coming of peak season of petroleum demand. The US oil refineries have revived production after the seasonal overhaul, and thus, the operation of crude oil started to rise.
Crude oil reserve decreased. The Cushing region referred to the port of delivery of light low sulphur crude oil futures of The New York Mercantile Exchange, Inc., NYMEX. In April, the crude oil reserve was higher than 62000 thousand buckets, reaching the highest level in history; yet it dropped continuously in that region in May.
The major factors hindering the oil price of position USD60 in growing again were:
Iran increased production. As a member of OPEC, Iran has prepared to increase 1000 thousand buckets of crude oil export per day after reaching the agreement with the six countries. It has built suppression towards the oil price with the gradual growth of production in several countries, such as Iran, Iraq and Saudi.
The US shale oil was rich. Although the shale oil manufacturer in America has greatly reduced the amount of well-drilling, the highly effective drilling machine could still support the growth of the US crude oil production. Meanwhile, there were 3000 more oil wells, which were equal as a hundred million more crude oil reserves; it would take a short time to release rapidly.
The above factors have driven the oil price to rise, yet, it would be laborious for it to increase again. It is expected that WTI will maintain at USD60 back-and-forth in a short run.
1.2 Upstream Monomers – Variations in rise and fall
Figure 2: Upstream monomers SM&C3(Mar-May2015)
Source: Chem99
Figure 3: Upstream monomers AN&BD(Mar-May2015)
Source: Chem99
Table 2：SM、C3、AN、BD fluctuation(Apr-May2015)
Apr 2015 average May 2015 average May Vs Apr 2015
SM USD1315 USD1366 ↑3.8%
C3 USD1003 USD974 ↓2.8%
AN USD 1430 USD 1427 ↓0.2%
BD USD968 USD1075 ↑11.1%
Source:Chem99、HK Traders
Most of the downstream derivatives of monomer have increased in May, which indicated that the downstream demand had support for the price of upstream monomer in a certain extent.
1.3 Plastic Raw Materials Market – One falls another rises
ABS
Figure 4：The Comparison of Spot price, Cost& Ex-factory price in an ABS market
（Mar-May 2015）
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.
Table 3：ABS fluctuation（Apr-May 2015）
Apr 2015 average May 2015 average May Vs Apr 2015
ABS USD1667 USD1717 ↑3.0%
The market price of ABS was close to the factory price of chemical factory, they were very similar in May. This indicated that the market price was greatly influenced by the factory price, which both had a relatively large distance with production cost.
In the upper-half of May, chemical factory offered a low factory price, the market price went steadily. In the lower-half of the month, the production cost of ABS fell greatly because of Styrene (SM), with low market demand, chemical factory has reduced the factory price, the market price was lowered.
The reduction extent of the market price was lower than that of the cost, because some customers purchased goods in their ideal prices in a timely manner. This has formed a relatively focused demand release in a certain extent, creating a support for the price, which also maintained the price level of the monthly average value. ABS has increased 3% in May compared with the previous month.
GPPS
Figure5：The Comparison of Spot price, Cost& Ex-factory price in anGPPS market
（Apr-May 2015）
Source: HK Traders
The cost of GPPS in the graph is SM (Styrene) +US$120. It hasn’t included expenses like terminal handling charges.
Table 4：GPPS fluctuation（Apr-May 2015）
Apr 2015 average May 2015 average May Vs Apr 2015
GPPS USD1260 USD1349 ↑7.1%
In May, the market price of GPPS was stable with growth, yet the production cost of GPPS fell after growth, the factory price was steady and increased, and it fell later as well.
The factory price of chemical factory fell then went back, which was mainly due to a lowered monomer price, Styrene (SM) had a most obvious reduction in particular. In Asia regions, SM devices concentrated overhaul were going almost the end. It is expected that the increased supply will cause SM to reduce for about USD180/MT in two weeks in the lower-half of May.
Both the production cost and the factory price of GPPS went low, yet, in fact, the supply of goods was not rich enough in the market. This has created a motivation for the market price. In general, the price has increased 7%.
PP
Figure 6：The Comparison of Spot price 、Cost& Ex-factory price in an HOMO PP market
（Mar-May 2015）
Source: HK Traders
The cost of HOMO PP in the figure is calculated by C3 (Propylene) +US$120. It hasn’t included expenses like terminal handling charges.
Table 5：HOMO PP fluctuation（Apr-May 2015）
Apr 2015 average May 2015 average May Vs Apr 2015
HOMO PP USD1374 USD1432 ↑4.3%
In recent three months, HOMO PP mainly maintained a stable trend with growth. In May, it has reached a high position and the price then reduced in a small extent. The theme of HOMO PP was still tense supply in May, most of the corporations with orders would take orders in an early stage as they worried about supply may not match with the production.
In mid-May, the newest PP factory prices of chemical factories in Taiwan and Korea went high. Particular trademarks did not contain production plans in June, leading to a continuous tense supply, the market price went low in a small extent under the condition that the production cost was reduction at the end of the month. In general, the market price in May has increased 4.3% compared with the previous month.
Chapter 2: Plastic Market Forecast inJune 2015
2.1 Imports of ABS/PS/PP
Figure 7：Type and capacity of import raw material in Southern China, East China and other regions (Jan-April 2015)
Source: the Customs
Among the import raw material types, PP has been taking a leading position. The import capacity of plastic raw material in Southern China region took the first place in the country, which implied that the import capacity of plastic raw material will still concentrate in Southern China region in the coming month.
Figure 8: Imports of raw material in traders and factories in Southern China region (Jan-April 2015)
Source: the Customs
According to the above figure, the total capacity of import of plastic raw material in factories was three times of that of traders, which indicated that traders had few sources in general. Among the sources, amount of PP accounted for the largest proportion.
Figure 9：Fluctuations of import raw materials of traders and factories in South China region
（Jan-Apr 2015）
Source: the Customs
According to the fluctuations of import raw materials of traders and factories, they shared an obvious consistency. The import capacity of plastic raw materials in April reduced from the high position in March, one of the reasons was restrained demand in Easter holiday in April. Excluding vacation factor, it is expected that the demand capacity towards raw materials will increase in the coming month while stepping into peak season.
2.2 Global economy – Gentle development
Figure 10：PMI of China, the US and Eurozone（Jan-May 2015）
Source: Xinhua 08
＊China Official PMI- Jointly published by China Federation of Logistics & Purchasing and the National Bureau of Statistics
＊America ISM PMI- Published by the US Institute for Supply Management
2.3 Plastic market forecast
ABS
In June, the ABS market will encounter restrictions of cost and demand. In May, although there was a small growth in average value of ABS major synthesized monomer SM, after the overhaul season, the increase of production capacity supply has caused a higher price with pressure.
In traditional peak season, some of the toy and electronic appliance industries, which use ABS as major production raw material, have received most of the orders in an earlier period. Orders were similar to that in May, with the limited ABS supply in recent months, therefore, some customers have preordered for June. There is no exciting element regarding demand at the moment.
Under the circumstances of unobvious instructions in cost and demand, the factory prices of chemical factories had actually more direction. Apart from reference cost and demand, the reserve capacity is also a vital consideration for the factory price. If it is not informed that the production line in chemical factory stops operation accidentally, the factory price in early-June will decrease under stable supply. The market price had a steady motivation rather than a growthin the whole month.
GPPS
Supported by the factory prices of chemical factories in recent two months, the market price of GPPS was positioned at a relatively high level. Demand was one of the factors that support chemical factories to set a high factory price. Therefore, if the downstream demand has a weak receiving power, the factory price could possibly reduce then back even there are no abundant inventories.
Traditional industries, such as plastic fork and knife and CD tape, which use GPPSas major production raw material, will go through a little travel peak during the summer vacation in July to August in general, one-off utensils will be related to tourism correspondingly. This kind of product usually has a short delivery period, and thus, the plastic fork and knife industry will boom in June. Most of the CD tape industries have received orders of the coming year a year ago, excluding particular impromptu orders, it is expected that the production demand in June will be similar to that in May.
In general, traders do not carry out bulk purchase due to high price of GPPS; it would be difficult to find large quantity of spot goods in the market, and thus, some of the trademarks majorly order goods. GPPS has formed a hedge in terms of product capacity and demand. The market price reduced then back at early-June, yet it will be uneasy to reduce greatly in the coming days.
PP
It has been a prolonged period for the tense supply leading to an increasing price in the PP market. In May, although the price in the PP market had an increasing movement continuously, the PP cost has first fallen 2.5% in recent months, the cost had weaker support.
In June, since Saudi and zero tariffs PP had ship one after another, this will replenish the insufficient supply in the USD market in a certain extent, which would possibly form a price crash towards some trademarks as well.
At the time of replenishing supply, a PP chemical factory in Taiwan has declared about the transparent PP production problem in particular trademark, confirming the production date will be 18th June or after, therefore, the fastest delivery date will be at the end of June. This could possibly cut off particular product supply; the prices of other replaceable transparent PP would possibly be supported.
In general, PP was polarized in June, prices of most of the trademarks had great modifications while particular trademarks had no supply.
Chapter 3: Summary–Take in in low position
Since the oil price and monomer are fluctuating, it would create different attitudes in part of the traders in the market if the factory price goes low; the quoted price has both high and low correspondingly. It is recommended that customers with orders to hold the targeted price level of goods, to take in when it is low in order to ensure guarantee, to strive for reducing costs while preparing stocks for production successfully.
Chapter 4:Appendix-Major Events
2 May 2015 Repsol, Spain and Grupo Kuo, Mexico have increased the production capacity of synthesized rubber in the joint venture, Dynasol. It is expected that Dynasol will have 500 thousand tons of the capacity selling to the tire markets in Latin America, Northern America and China per year.
7 May 2015 The US crude oil reserve has reduced 3900 thousand buckets, which was the first reduction since 26th December, 2014. The West crude oil futures have greatly risen. WTI has increased from USD0.53 to USD60.93, reaching a new high in recent half year.
15 May 2015 After the 777 thousand tons SM device accident and stoppage of machinery in Chevron Phillips, BASF, the chemical company in Germany located at Ludwigshafen am Rhein, had a fire accident of Phthalic Anhydride device, which also forced SM to stop operation. Due to the breakdown of devices, SM FOB Korea had USD1435-1436 in closing quotation per tons, with an increase of USD58 per tons.
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