Singapore (ICIS)-Under the dual pressure of tepid demand and weak upstream propylene oxide (PO), the Asian price of polyether polyols in China's domestic RMB-denominated market and Southeast Asian dollar-denominated import markets has fallen in value.

This week, the domestic price of China's soft foam block polyol denominated in RMB is hovering at 12,000 yuan/ton DEL (delivery) in Eastern China.

According to ICIS data, this is far from the situation at the end of October, when the price of soft foam block polyols in East China calculated by DEL was still 13,000 yuan/ton and above.

Market participants said that the delivery price of Chinese slabs denominated in US dollars usually follows the trend of RMB prices, and it also fell to an average of US$1,675/ton on November 7 and is expected to fall further this week.

"Demand is too weak," a Chinese polyol manufacturer said, adding that "even if the price is lower, new orders are still very few, somewhere in between."

Polyols have been taking off in China for some time, because many downstream foam manufacturers have postponed bulk purchases until they become clearer about the ongoing US-China trade dispute, which may affect their own export markets.

Polyol is mixed with toluene diisocyanate (TDI) to produce polyurethane foam, which is used to make finished products such as bedding and mattresses.

However, the recent losses in the upstream PO market are a glimmer of hope for Chinese polyol manufacturers, because the lower production costs now allow them to lower their export sales prices more freely.

In the case of a weak domestic market, Chinese polyol manufacturers see the latter as a way to promote sales and transportation of some goods.

According to ICIS data, the price of PO in China dropped sharply last month, with a cumulative drop of nearly 12% during this period, and closed at 11,750 yuan/ton DEL East China on November 9.

The US dollar-denominated Chinese-produced block polyol quotation has fallen accordingly. It is reported that the CFR (cost and freight) price in Southeast Asia this week is lower than 1,700 US dollars/ton, which is at least 100 US dollars/ton lower than the price shown for similar goods. In the past two Month.

However, as more goods from China enter the export market, and export demand from major regions such as Southeast Asia is not structurally strong, market participants said that this will inevitably depress CFR Southeast Asia prices.

Unlike previous years where demand for polyols usually increased in the third and fourth quarters due to seasonal factors, market participants said that this expected demand could not be realized this year.

In fact, according to ICIS data, CFR Southeast Asia prices have fallen in recent weeks, falling by more than 6% from October to November when trading began.

This is in sharp contrast to the situation a year ago, when polyol prices in Southeast Asia remained firm in the third quarter/fourth quarter.

Like their Chinese counterparts, many foam manufacturers in Southeast Asia are cautious in purchasing because of concerns about the upcoming economic slowdown in the region.

The Private Purchasing Managers Index (PMI) of Indonesia, Thailand and Malaysia fell month-on-month in October.

Market participants said that as long as Asian demand from China to Southeast Asia does not improve, the prospects for recent increases in polyol prices may be bleak.

Focus articles by Ai Teng Lim

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