2012-08
|
|
|||
Table of Contents
Plastic Market in August——Rising at first, falling after. 2
International Oil Price（WTI）--Returns to a high level 2
Upstream monomers—Falling and rising at times. 3
Plastic resins market—Rising at first, falling after. 4
Forecast in September——A More Apparent Supply Vs Demand. 8
International Oil Price—— A Downward Pressure. 9
Upstream monomers—— A moderate adjustment 9
Forecast in September. 9
Suggestions. 11
Plastic Market in August——Rising at first, falling after
The International Oil Price rises. The price of upstream monomers remains high. In the traditional peak season of production, the downstream demand gradually releases. The upward trend in the raw materials of plastic manufacturing continued in early August. The price then started to fall in late August.
International Oil Price（WTI）--Returns to a high level
Figure 1： International Oil Price (WTI) （2012 June-August）
Data from：NYMEX
Table 1：Volatility Scale of International Oil Price
|
August 2012 Vs August 2011 |
August 2012 Vs July 2012 |
||
|
WTI |
↑9% |
↑7% |
|
The International Oil Price rose from USD78.2 in late June to a high USD97.26 in August.
In early August, the reduction of oil production in North Sea and the news that US reinforced her sanction against Iran has led to a worry of oil supply in the market. The oil price was backed up and surged to above USD90.
The European economy continued falling. The market expected more simulative policies from the European Union. The oil price was close to USD98 when it comes to late August. It is the highest level in 3 months.
Averagely speaking, the average International Oil Price in August was USD94.It was a USD6 increase from USD88, the July average.
Upstream monomers—Falling and rising at times
Figure 2：Upstream Monomers（2012 June - August）
Data from：Chem99
Data from：Chem99
Table 2： Volatility Scale of Upstream Monomers
|
August 2012 Vs August 2011 |
August 2012 Vs July 2012 |
|
|
SM |
↓5% |
↑4% |
|
C3 |
↓15% |
↑1% |
|
AN |
↓18% |
↑13% |
|
BD |
↓48% |
↓16% |
The strong trend of oil price supported the monomers market. The supply of monomers decreased as major chemical plants planned for overhaul. In August, every monomer has fallen but at different levels when comparing with same period last year. The 48% decrease of BD (Butadiene) price was the most significant. When comparing with last month, the price of SM (Styrene) rose by 4%, AN (Acrylonitrile) rose by 13%. But BD (Butadiene) dropped by 16% due to a weaker downstream demand.
Plastic resins market—Rising at first, falling after
ABS
Figure 3：The comparison of spot price and production cost in an ABS market（2012 June - August）
Data from: Hong Kong Traders
The cost of ABS in the figure is calculated by 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：Volatility Scale of an ABS market
|
August 2012 Vs August 2011 |
August 2012 Vs July 2012 |
||
|
ABS |
↓9% |
↑1% |
|
ABS rose from June. The upward continued in July. The price dropped a bit when it comes to late August. All in all, the price in August rose a bit of 1% when comparing with that in July.
The price of BD (Butadiene), the upstream monomer of ABS dropped. The production cost of ABS went downward. The cost was much lower than the market price in mid-August. The difference between the 2 was USD44 at the end of August.
PS
Figure 4: The comparison of spot price and production cost in an GPPS market（2012 June – August）
Data from: Hong Kong Traders
The cost of GPPS in the figure is calculated by SM（Styrene）+US$120. It hasn’t included expenses like terminal handling charges.
Table4: Volatility Scale of an GPPS market
|
August 2012 Vs August 2011 |
August 2012 Vs July 2012 |
||
|
GPPS |
↓1% |
↑4% |
|
|
HIPS |
↓2% |
↑3% |
|
The price of GPPS was steady in August. The volatility in the entire August was 1%, a 4% increase from July.
The rising trend of SM, the upstream monomer of GPPS was apparent. The production cost of PS also rose because of that. The difference between the 2 was USD15 at the end of August.
PP
Figure 5: The comparison of spot price and production cost in an HOMO PP market（2012 June - August）
Data from：Hong Kong 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.
Figure 5: Volatility Scale of an HOMO PP market
|
August 2012 Vs August 2011 |
August 2012 Vs July 2012 |
||
|
HOMO PP |
↓12% |
- |
|
|
BLOCK PP |
↓10% |
↑1% |
|
|
RANDOM PP |
↓12% |
↓2% |
|
The price of HOMO PP changed slightly at a high price when it comes to August. The price at the end of the month was a 1% increase from the start of the month. The average price in August was the same as that in July.
The production cost of PP increases gradually together with the price increase of C3 (Propylene), the upstream monomer. Price contradiction has appeared for a short period in late August. The production cost was a USD8 higher than the spot price by the end of the month.
Summary of August
WTI
The oil price is supported by overhaul going on in the North Sea and the oil production reduction by OPEC. Also, the 3rd quarter is the seasonal growth period for oil demand. The International Oil price has once surged to around USD98 in late August, the highest level since May. At the end of the month, the US oil inventory increased. The oil price dropped to USD94.6, around the average.
Upstream monomers
The price of upstream monomers follows the upward trend of oil price. But the undesirable demand often exists and restricts the surging continuity of monomers. All in all, the price of each upstream monomer went different ways. The price of SM (Styrene) rose by 4%, C3 (Propylene) rose by 13%, BD (Butadiene) dropped by 16%
Chemical plants
The pressure of the cost of materials cost increased. Its processing cost also rose due to reduction in production. The mill price of ABS chemical plants rose in early August. However, the acceptance ability also hindered the continuous rise of mill price. The mill price remained unchanged throughout mid and late August.
Plastic Market
The plastic market has started to rebound since June. The rate of increase was large in July. Although we didn’t see any sign of drop for the mill price in late August, the price eased as the atmosphere of the market turned weak.
The price of ABS continued its rising trend due to limited supply. As the expiring futures piled up in mid and late August, dumping was seen from some suppliers. Also, the production quantity of chemical plants was quite stable. Together with the certain space between production cost and mill price, some suppliers lowered the price in spot market and future market in advance.
In August, the market price of PS was strong in general. The No. 2 Alkene Cracker of the Formosa plastics group started overhauls from mid-August. The rising trend of SM also supported the market price. On the other hand, the downstream demand has long been far from flourishing. The price of PS remained high as the chemical plants controlled output by reducing the rate of operation.
The source of PP restored a bit continually. But the price of C3 remained high and led to a rising trend of the price of PP. Given the prerequisite of scarce supply, the sign of retrace for the August market price wasn’t significant.
Forecast in September——A More Apparent Supply Vs Demand
As the traditional peak season diminished gradually, the seasonal demand start to drop, the pressure in the raw material market of plastic accumulates. The supply Vs demand will become more apparent in the coming September, as well as the Golden Week Holiday in early October when there is time to replace.
International Oil Price—— A Downward Pressure
The International Oil Price has been around as high as USD100, the August average reached USD94. How will it possibly go in September?
The oil field in North Sea is planned for overhaul and production reduction in September. Together with the violence in Syria, worry on oil supply will be induced. The atmosphere of oil market will be supported if QE3 is agreed by the US Federal Reserve.
But even so, the slower economic growth worldwide has led to a drop in oil demand. Also, the election campaign will start in September. A High oil price is an unfavourable factor. All these put downward pressure on oil price.
Upstream monomers—— A moderate adjustment
The international oil price faces a downward pressure in September. It also has a strong dominance over monomers. So will the trend of monomers follow the oil price closely in September?
Many naphtha cracking plants in Asia will arrange for overhaul. Some AN cracking plants in Japan and Korea also planned for overhaul before winter comes. The market supply for monomers falls and there is a potential for price to rise.
At the same time, whether the downstream demand can follow smoothly determines the trend of monomers to a great extent. The current economic situation is not promising and the downstream demand isn’t prosperous. The continuous rising trend of monomers faces resistance as well. All in all, a moderate adjustment for monomers market is quite possible.
Forecast in September
Entering in September, how will the downstream demand follow when the traditional season fades away slowly? How will the plastic market perform?
ABS
In September, ABS will have support for cost but the demand support will be a bit weak. The force to achieve another historical high price is a bit insufficient. AN (Acrylonitrile), a major material of ABS will experience more overhauls in September. Its supply will thus reduce. The price of ABS has not much room for massive upward adjustment as the downstream demand decline gradually. It will most likely end up with small fluctuations at upper price level.
PS
The market price of GPPS and HIPS didn’t increase explicitly in August. A U-turn in the after-market is of slim chance as well.
Naphtha cracking plants in Asia start overhauls in succession in September. The production of Ethylene will decrease by around 2.05 million tons. It may affect the supply of SM (Styrene) and thus make the cost of PS hard to decrease. The profit margin of chemical plants drops.
There is a cost pressure for PS and there is a room for its price to rise. However, the force is weak as it’s hard for the market demand to follow completely.
PP
The supply of PP has not been abundant for a very long period of time. Some model materials even face faults in supply.
The oil price hovers at the upper price level. The price of upstream monomer C3 (Propylene) remains high and doesn’t drop. The cost pressure of PP remains. The production cost of PP was very close to the market price at the end of August. It even comes with price contradiction sometimes.
Generally speaking, the PP cost is supported steadily in September. As short supply still exists, there is not much room for the market price to go down. The market situation is very probably remaining high steadily, following the rising trend in August.
Suggestions
When the plastics market is at the adjustment stage, it’s a good time for customers to pile up stocks when the market price is lower than the chemical factory-gate price. On the other hand, transportation may be put on hold in late September when the National Day Golden Week approaches. Faults in good supply may appear easily. Customers are better off to arrange the purchase plan in advance.
When market price becomes rigid under the demand Vs supply, it may form a U-turn if there are irresistible external factors. Production is always easily affected for those customers who use a single material only.
It is suggested that customers can consult more on alternative materials when they are doing purchases. If a certain material is short in supply, they can still try their best to lower the production risk.
Appendix – Major events
4August 2012 The oil production in North Sea dropped in September. The International Oil Price surged all of a sudden. There is a tremendous 5% increase of the price of New York light sweet crude oil futures contract
10 August 2012 The No. 2 Alkene Cracker of the Formosa plastics group started a 30-day overhaul from mid-August. It can produce 1.03 million tons of Ethylene, 0.5 million tons of Propylene and 0.135 million tons of Butadiene annually.
13 August 2012 Workplace safety crisis happened again in The Mailiao Industrial Park of Formosa plastics group. A fire broke out in the No. 2 SM (Styrene) factory of the Formosa plastics group. It was put off an hour later.
～The End～
Company Information
Hong Kong Office:
Rm809-811,No.8 Commercial Tower,8 Sun Yip Street,Chai Wan,Hong Kong
Tel: 852-2566 6103
Fax: 852-25701173
Email: hk@sunta.hk
Shen Zhen Office:
Casic Blodg No.4019 Shennan Rd.,Fu Tian District,Shen Zhen,P.R.C.
Tel: 0755-88840920
Fax: 0755-88840930
Email: sz@sunta.hk
