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Spot ethylene, propylene prices move lower in Asia; HIPS’ premium steady despite slack demand

Plastics pricing information supplier ChemOrbis is reporting that spot prices for ethylene and propylene in Asia have posted significant declines over the past week to reach their lowest levels in months. Slack demand and the drop in crude oil and naptha prices are supporting this downward trend. On the styrenics front, global polystyrene offers are generally down but prices for HIPS retain their large premium over GPPS due to the high cost of butadiene and tight HIPS supply.

According to ChemOrbis, spot ethylene prices on a CFR Northeast Asia basis have fallen by around $50/ton over the past week to reach their lowest levels since the middle of January. When compared with the start of the month, spot prices on a CFR Northeast Asia basis are down by around $120/ton. Poor demand for major ethylene derivatives such as polyethylene (PE) is the main reason for the decline in prices. 

According to data from ChemOrbis Price Index, spot prices for LDPE film grades on a CFR China, cash basis have fallen by $20-40/ton since the first full week of May while HDPE film grade prices have dropped $40-50/ton and LLDPE film grade prices have declined by $50-70/ton over the same time period. The majority of overseas suppliers of HDPE and LLDPE film grades are currently operating below their theoretical production costs based on spot ethylene prices, reckons ChemOrbis, as PE prices have been pulled lower by poor demand, helping to reinforce the downward movement in ethylene prices.
 
In the propylene market, says the pricing authority, spot prices on an FOB Korea basis have dropped by $75/ton over the past week, reaching their lowest level since late February. When compared with the start of the month, spot propylene prices have come down by around $130/ton. In addition to slower derivative demand, propylene prices have been pushed lower by rising supply levels from both Japan and South Korea. Crackers in South Korea are beginning to return to normal operations following a heavy cracker maintenance season while the restart of some crackers in Japan, which had been shut following the massive earthquake on March 11, reduced demand from buyers looking to cover the shortage of Japanese cargoes. 

According to data from ChemOrbis Price Index, spot prices for homo-PP injection and raffia grades on a CFR China, cash basis have lost $40-80/ton since the first full week of May, leaving most overseas homo-PP suppliers operating below their theoretical costs based on spot propylene prices even after the recent declines in propylene prices.

Turning to styrenics, ChemOrbis reports that in global polystyrene (PS) markets, including China, Italy and Turkey, the overall market outlook for June is bearish on the back of the weak demand and volatile upstream costs. Global PS offers are generally softer but high impact PS (HIPS) prices continue to retain their large premium over general purpose PS (GPPS) despite poor demand, but given the higher costs of butadiene as well as the relatively tighter supplies for this particular product.
 
Styrene costs in May have been trending in line with crude oil prices, which hover around $100/bbl. In Asia, styrene costs only shed $10/ton on FOB Korea basis over a week's time although the decrease amount reached $90/ton when compared with the beginning of May. The situation in the European styrene market is similar as FOB NWE basis spot prices dropped only $15/ton decrease on a week-over-week basis, but the drop is $145/ton with respect to prices at the start of May.  
 
In the benzene market, Asian spot prices indicate $120/ton decreases on FOB Korea basis while European offers lost ground by $145/ton on CIF NWE basis when compared to the beginning of the month. 
 
However, higher butadiene costs soften these bearish affects coming from the benzene and styrene markets for HIPS offers as prices for this particular product face relatively smaller decreases when compared with GPPS while they continue to carry a larger premium over general purpose PS. Polybutadiene is added to PS during polymerization to create HIPS.

In Europe, an initial butadiene contract settled with €270/ton ($384/ton) increases when compared to the May settlement. Meanwhile, May contracts had already moved up by €360/ton ($512/ton) over April in the region.
 
In Asia, spot butadiene prices are around $100/ton lower on FOB Korea basis when compared to the previous week due to the waning arbitrage opportunities to the U.S. However, the most recent spot butadiene prices are still $405-410/ton higher when compared to those at the beginning of May.
 
In China, both local and import PS market levels moved down during the past week due to the weak demand and softer styrene costs. Despite these bearish developments, dutiable HIPS offers still carry a premium of $210-220/ton over dutiable GPPS, while non-dutiable HIPS carries a $200-230/ton premium over non-dutiable GPPS. Slightly limited HIPS supplies and the higher butadiene costs create this larger gap between GPPS and HIPS prices.

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