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July 27, 2008

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Polymerupdate global plastics pricing: Asian, European producers weigh costs against demand destruction

Polymerupdate (http://www.polymerupdate.com) is reporting that an unnamed South Korean polypropylene (PP) maker has decided to leave price offers to China unchanged for now in spite of high cost pressures since sales to select Asian markets have staganated. PP homopolymer injection and raffia grade offers are at $2100/tonne CFR China Main port, with film grades higher. The producer’s inventories had been kept in check by Western demand, particularly from Latin America.

Elsewhere, Polymerupdate learned that Formosa Polypropylene (Ningbo) Co. was running its PP plant located at Ningbo at 80% capacity rates. The 450,000 tonnes/yr PP plant has been mainly producing biaxially oriented grades, with plans to shift production to PP block copolymer. Offer prices on a CFR China basis for PP injection and PP raffia grades are at $2060 to $2080/tonne from Taiwan, with offers to China from South Korea trading in a similar range. PP film offers are at the $2150/tonne CFR. Here also, Polymerupdate quotes a source as saying, “Demand from buyers in Latin America is showing no signs of fatigue.”

Low-density polyethylene (LDPE) prices ended up in Asia last week, gaining about $20 to $30/tonne from the week before. General-purpose film grade offers to China rose to $1950 to $1970/tonne CFR while offers of LDPE coating grades were at the $2000 to $2020/tonne CFR China. Polymerupdate says Chinese buyers remain hesitant to lock in those prices due to a decline in domestic prices of LDPE. In the rest of Asia, LDPE prices were firm, with general purpose offer prices pegged at $2100/tonne and July quantities of one producer already sold out at these levels.

In polyvinyl chloride (PVC), suspension grade offers from Hanwha are at $1380/tonne CIF Nhava Sheva with 90-day LC terms. Offers from LG are at $1370/tonne CIF Nhava Sheva with the same 90-day L/C payment terms. Taiwanese competitor Formosa is offering PVC for August at $1350/tonne CIF Nhava Sheva with L/C at sight basis, while Tianjin Dagu, China has PVC at $1330/tonne CIF Nhava Sheva with sight L/C payment terms.

Prices of polystyrene (PS) inched higher in Asia last week due to rising upstream SM (styrene monomer) values. Firm crude and naphtha prices coupled with higher ethylene and benzene helped further support a bullish undertone in SM, which fueled PS buying interest. General-purpose prices on a CFR Asia basis were assessed up at $1775/tonne, with high-impact prices at $1885/tonne CFR Asia. Going forward, targets for general purpose were above $1800/tonne CFR, while high impact could move $100/tonne higher to $1900/tonne CFR . Polymerupdate says several PS producers in Asia were operating at run rates of 50% and below due to high upstream product costs and squeezed margins.

Squeezed margins prompted acrylonitrile butadiene styrene (ABS) makers in Asia to hike their offers above $2200/tonne CFR. Polymerupdate quoted a source at one Asian ABS producer describing the current market as such: “We refuse to work with negative margins and will continue to pursue higher prices so as long as our input costs are gaining,” adding that their company would “slash” ABS production rather than sell the resin at a loss.

In Europe, ABS contract prices rose, with general purpose and natural grade at euro 1830/tonne FD North West Europe, following a euro 15/tonne spike. In the spot market, ABS prices were at euro 1600/tonne FD North West Europe. Polymerupdate reports that some sellers are encouraging clients to build inventories at current prices, anticipating further increases.

PVC suspension-grade prices in Europe this week were assessed unchanged from the week before at euro 1035/tonne FD North West Europe. Polymerupdate reports that in spite of buyer resistance, some producers intend to push forward with an increase to July contracts. That boost would be at least euro 100/tonne, with some PVC producers seeking hikes up to euro 120/tonne in July contracts. PVC offers from Asian sellers to Turkey were heard above $1440/tonne, while offers from U.S. suppliers were at $1390/tonne CIF. Turkish producer Petkim is reported to have priced PVC at $1470/tonne.

As PP availability in Europe tightened, prices edged higher, with contract prices of PP homopolymer injection grades up to euro 1305/tonne FD North West Europe. PP copolymer prices were assessed at euro 1355/tonne FD North West Europe. In the spot market, prices have inched up with homopolymer grades at euro 1255/tonne FD, while prices of PP copolymer are at euro 1310/tonne FD.

PS was also on the rise, with general-purpose contracts at euro 1505/tonne FD North West Europe, and high impact seen at euro 1555/tonne FD North West Europe. In the spot markets, general-purpose prices were assessed at euro 1235/tonne FD North West Europe, with high impact pegged at euro 1290/tonne FD North West Europe. Polymerupdate reports that Ineos Nova announced an increase in the premium for all high impact PS products in Europe to a minimum of euro 70/tonne effective August 1, citing high prices of butadiene rubber.

Spot LLDPE prices in Europe bolted higher, with spot material at euro 1390/tonne FD North West Europe, and offers heard above $1400/tonne FD North West Europe. Polymerupdate says “robust regional demand, tight avails, and high prices of upstream ethylene,” are pushing the market higher. Contract prices of LLDPE have also rallied to euro 1520/tonne FD North West Europe, up some euro 80/tonne from the previous week’s assessed contract prices. General purpose LDPE prices rose sharply, with spot material to euro 1485/tonne FD North West Europe. Contract prices also firmed, rising to euro 1540/tonne FD North West Europe.

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