2012-10
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Author: Kim Lin-Marketing Department Date：2 November 2012 Website: www.sunta.hk |
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PLASTIC MONTHLY REPORT IN 2012（No 32） Case by Case, up and down
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Table of Contents
Plastic Market in October——Rising and Falling at Times 2
International Oil Price（WTI）—— Remained high 4
Upstream Monomers——Going soft 5
Summary of October 6
International Oil Price 6
Forecast of plastic market in November 8
International Oil Price——Fluctuates slightly 8
Upstream Monomers——Going their own ways 8
Plastic raw material market - adjustment 9
Suggestions 10
Plastic Market in October——Rising and Falling at Times
ABS
Figure 3: The comparison of spot price and production cost in an ABS market（2012 August– October）
Source: Hong Kong Traders
The cost of ABS in the graph is 0.6*SM（Styrene）+0.25*AN（Acrylonitrile）+0.15*BD（Butadiene）+US$300 It hasn’t included expenses like terminal handling charges.
The price of ABS was relatively stable in October. For example, in a market of ABS at sport, the average value for the whole month is US$ 1954/ton. The difference between the highest and lowest quote is US$ 28, a volatility rate of 1%. By the end of the month, the production cost dropped. The market price fell by US$ 28 from the price at the beginning of the month to US$ 1938, meaning a 1.42% decrease.
PS
Figure 4: The comparison of spot price and production cost in a GPPS market（2012 August - October）
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.
At the beginning of the month, the spot price quote of a GPPS market was as relatively high as around US$1659 due to high cost. However, after a long while, since downstream demand didn’t increase significantly, agents replenished cautiously. The price climbed as goods at spot fell. In late October, the price remained stable. At the end of the month, the price increased by around US$ 50 to US$1713/ton, meaning an increase of 3.15%
PP
Figure 5: The comparison of spot price and production cost in a HOMO PP market（2012 August - October）
Source: 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.
The price of Propylene fell together with the International Oil Price in October. The production cost of PP has one dropped to a minimum US$1409/ton, corresponding to a quote of HOMO PP sport price at US$1523/ton. The price of PP remains stable throughout October and rose steadily. It was US$1525 at the end of the month, a US$15/ton increase from the beginning of the month, meaning a 0.9% increase.
International Oil Price（WTI）—— Remained high
Figure 1: International Oil Price (WTI)（2012 August- October）
Source: NYMEX
The average International Oil Price in October is US$89.88/barrel, a 5-dollar decrease from last month’s average of US$95.
At the beginning of the month, the Oil Price made a record of the year drop within a day of 4% to US$88/barrel. The fire in the biggest refinery in the US induced the worry on supply shortage. The Oil Price increased significantly by 4% to US$92/barrel.
In late October, investment bank Goldman Sachs significantly lowered the oil price forecast for the first time in 10 years. The oil price started to drop. US commercial crude oil inventories increased 11.1% over the same period last year, meaning a largest increase in 3 years and this accelerated the price drop. At last it fell fifth in a row to a 3-month low at US$86/barrel, and remained the same at the end of the month. That was a fall of 7.06%.
Upstream Monomers——Going soft
Figure 2: Upstream monomers（2012 August- October）
Source: Chem99
Source: Chem99
The price of SM (Styrene) rose 3% from last month to US$48/ton in October. Its price went soft at the end of the month, but there was still a US$39 increase from the beginning of the month, reaching US$1557/ ton.
For other monomers, C3 (Propylene) fell 5% to US1274/ton; AN (Acrylonitrile) fell 4% throughout the month to US$1883 due to price fall in its raw material Propylene, as well as the fall of demand in Acrylic. BD (Butadiene) also fell 4% to US$1897/ton.
Summary of October
International Oil Price
The October average of WTI in October is 89.88, a US$5/ton fall from last month
The refinery in US suspended production due to faults and led to a rise in oil price. Repairs in North Sea oil fields also suspended production and dragged a large number of oil export. These adversely affected oil supply and oil price fluctuated highly.
Also, tension between Turkey and Syria grows. This constituted a menace to oil supply in the Middle East, which held the oil price high.
However, the European Debt Crisis didn’t grow optimism. Credit ratings of 5 regions in Spain were downgraded and increased her money lending cost. The debt in Greece was also concerned and a bailout agreement was to be achieved with the International lenders. Economy contraction in the Euro zone worsened and threatened the oil demand in the region. The oil price fluctuated in October due to above factors.
Upstream monomers
The average price of upstream monomer SM (Styrene) was US$1535/ton, C3(Propylene) was US$1274/ton, AN (Acrylonitrile) was US$1883/ton, BD (Butadiene) was US$1897/ton.
Styrene performed well in October as the property market welcomed “Golden September and Silver October”. Demand for concentrated construction fitting increased. Instant demand of Styrene did well and price soared. Some chemical plants reduced the use of plastic materials for production and turned to sell monomers directly.
The sale of Propylene oxide, a downstream product of Propylene dropped and hindered the price of Propylene. Also, the sale of Polypropylene (PP) was relatively stable. The price of Propylene remained stable and fell slightly at times.
The cost of Acrylonitrile dropped as the price of its raw material Propylene fell. The downstream acrylic fiber market weakened. This made Acrylonitrile, which already faced higher storage, fell significantly for weeks.
The price of Butadiene went down narrowly due to weakened demand for synthetic rubber. The storage increased as stock continued to arrive. The price drop intensified.
Plastic raw material market
Following the trend of stably rising at the end of last month, the plastic raw material market in October continued to see prices go different ways for different products. Some are rising, some are falling.
At the beginning of the month, the cost of ABS rose as its raw material styrene went up. The market price remained high. However, the downstream demand slowed down, combined with increasing quote of some models, the volume is hard to follow. In mid and late October, the market supply tightens up. Combined with a callback of oil price and monomers, the market was in general waiting to see how it goes. In the whole month, the low end quote of an ABS was as low as US$1938/ton. It was a US$6 increase from the figure last month.
The rise of PS material is quite large. The market price increased following the cost pressure. When it comes to the end of the month, Styrene material fell from the peak due to a fall in oil price. The market became stable. However, as PS rose too vigorously and the end demand wasn’t significant, some chemical plants reduced their work rate. Some even started to sell monomer materials. These kept stock available at low level and supported the PS market.
The PP market increased its surge in October. One plastic PP has rose 2% for US$25. This increase didn’t ease the market pressure. As supply became tense, the brands with shortage also increased. However, most downstream plants purchased according to demand and held on to see how the market goes. This formed a stalemate.
Forecast of plastic market in November
International Oil Price——Fluctuates slightly
The International economy still fluctuates after entering the 4th season. It’s difficult to see the European Debt Crisis improves. The US economy seems hard to recover. These made the global economy risks downturn. On the other hand, the economic growth in China also slows down. Export becomes weak and so does growth of energy demand.
From above, we knew that the demand for oil in developed regions like US and Europe decreases. Emerging markets led by Asia decrease their growth in energy demand. The International Oil Price slightly lacks impetus to surge significantly.
The market is still concerned about Geopolitics, especially when the European Union tightened its sanctions against Iran. Also, concerns over conflicts between Syria and Turkey still exist. We cannot rule out possibilities of emergency which support the oil price.
At the same time, the cold winter will increase demand for oil. So the oil price may rise moderately.
On the other hand, as the US Presidential Election provides no shocks, it is not possible to see drastic fluctuations in International Oil Price. It is expected that the oil price will generally maintain a small fluctuation in November.
Upstream Monomers——Going their own ways
Upstream monomer SM (Styrene) gradually has been gradually moving up in recent 3 months. The cost pressure for chemical plants kept increasing and lowered the workload. Also, as winter is coming, demand for wall insulation and emulsion coating becomes weak. The operation rate of EPS industry will decrease from existing basis. The rising extent of Styrene will narrow down and price callback becomes possible.
The oil price continues to fall. C3 (Propylene) is very possible to keep its weak trend as there is no explicit demand breakthrough. This weakens the cost supports of AN (Acrylonitrile) as well. Also, the market of Acrylic, downstream product of Acrylonitrile is also weak. Its demand is weak too. At the same time, we have to consider the overall operating situation of Acrylonitrile market. If there is short supply then it’s easy to see the price of Acrylonitrile goes up.
As the price of Naphtha material fell, the price of BD (Butadiene) continued to be dragged down. Following the consumption of downstream synthetic rubber, it is possible to see a rebound for Butadiene in November.
Plastic raw material market - adjustment
November was still a slack season for production traditionally. It is of low probability to have breakthrough in downstream demand. To keep the profit increasing, chemical plants will make offer conservatively. It is easy to see a deadlock in plastic market during the process of demand Vs supply.
The price of GPPS and HIPS remained quite high for a long period of time. The downstream demand wasn’t significant. Agents replenished cautiously, the stock in circulation was small. Relatively speaking, the demand for Polystyrene in the country was larger. As the market share of RMB increased while US Dollar’s decreased, it is possible to see a price drop in November.
The demand of ABS was average after entering the 4th season. Some industry entered slack season and didn’t use ABS much. It can hardly push the price up. In the coming November, the price of its major monomer material Styrene tends to be soft. The fall in cost may make the price of ABS fall back slightly.
PP adjusted its price according to the cost. But the macro-economy in November is of many variables. There hasn’t been effective progress in European Debt Crisis lately, which dragged Euro down and brought USD up and pulled down the oil price as well as the raw material Propylene. Moreover, as both internal and external demand is weak, orders of downstream factories were poor. It is expected the PP market will readjust narrowly after reaching the new year-high.
Suggestions
A seesaw struggle will be seen in the November plastic market during the demand Vs supply process. But it is of low possibility to see large extent fluctuations. Being a player in the market, downstream clients should understand their own demand at first place. It is suggested that clients should pay attention to the changes in stocks being used. They should make reasonable storage arrangements according to actual production scenario, so as to guard against possible changes in market.
Appendix -- Major Events
5 October 2012 A fire started in the largest refinery in US. Oil price surged by 4.05% and closed at US$91.71.
9 October 2012 The European Stability Mechanism became in effect. EUR 500 billion can be lent out.
25 October 2012 The US stock market crashed and futures were undersold. WTI fell to a 3-month low at US$85.73.
～The End～
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