Weak demand, new capacity to push Asian polyolefins under $1000/tonne by year end

Some players in the Asian polyolefin market are holding out hope that much of the stagnation in activity and decline in prices will subside once China’s week-long National Day holidays cease. Global resin and petrochemical pricing consultant, Polymerupdate, in conversation with Asia-based petrochemical analysts, found that while many think buying momentum in the region will return and the slide in prices will cease, polyethylene (PE) and polypropylene (PP) could still dip below $1000/tonne before the close of 2009.
One analyst contacted by Polymerupdate said his firm was basing its opinion on the recent surge in regional supplies of PP and PE, which he felt will continue to hurt prices and remove “buying urgency” from the marketplace. Without that drive to buy, the analyst believes market scales will remain tipped in favor of buyers through November and December.
Looming in the background, an onslaught of new capacity is set to come online. Startups include Fujian Refining and Petrochemical Co. (800,000 tonnes/yr PE and 400,000 tonnes/yr PP), Dushanzi Petrochemical (550,000 tonnes/yr PP and 900,000 tonnes/yr PE), PetroRabigh (900,000 tonnes/yr PE and 700,000 tonnes/yr PP), and Reliance Industries Ltd.’s new PP facility (900,000 tonnes).

In addition to the barrage of new supply, the market is also likely to be impacted by weak demand conditions globally, with the threat of cheap offers from the U.S. to Asia, coupled with low natural gas prices, potentially pulling rates down further. Polymerupdate believes mounting competition among sellers will support bearish market sentiments and prompt buyers to remain on the sidelines with only need-based buying activity across Asia. [email protected]

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