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China: Probe into EVA Market

https://www.chemnet.com   Jul 27,2010
The situation of whole economic market is not optimistic, with ups and downs in crude oil and futures prices and limited transactions in plastics market. Look back into EVA market, the prices had been high for long time. Import prices fell sharply late last month and had no further downward signs while domestic EXW prices were revised down though few goods were available.
With the sharply dropping import prices last month, most of market participants hope that the domestic prices will fall. But after two weeks, why does the market price keep stable?


Currently, spot supply was scarce. First, foam supplies were tight because Yangtze-BASF unit was restarted in early June and shifted production to film. Second, as the import prices were higher than domestic levels, the import volumes shrank sharply from Q2. Third, Huamei’s EVA unit was in commissioning early last month with few availability; Formosa cargoes traded at low levels late last month just arrived. In a nutshell, the tight supply propped local prices up.


Although EVA market was in consolidation, deals at low levels were reported frequently because lack of favorable factors made EVA players take pessimistic outlooks. Domestic prices stood at high levels, but the sharply decreased import prices frustrated traders who then lowered prices to promote sales.
According to CBI, EVA demand was 241,800mt in the first half of 2010, down by 14.68% from the same period last year. While the national output was equal in the two years, the main reduction lied in imported sources. According to customs data, EVA import volume from Jan to May, 2010 was 190,300mt and that in June was expected to be 35,000mt. The total EVA import volume in the first half of 2010 was expected to be 193,800mt, down by 20.05% from the same period last year. The main reduction in the first half of 2010 was centered in H2 quarter because traders were cautious about purchasing imported cargoes.
According to national statistics, production status seemed well in the first half of 2010, as well as increasing of national output and export volume of downstream products compared with last year. But in fact, recovery of EVA demand was not quite well as expected. First, downstream users purchased on need-to basis and thus transactions were slow. Second, the mounted inventories caused by robust speculative demand at the end of last year thinned buying sentiment.


Compared with general high-pressure market, EVA prices stood high. For example, the price spread was CNY4,000-5,000/tonne between EVA foam and general foam. It was true that EVA prices would be downward in near term.
Because EVA downstream industries were in off-season and power brownouts would be implemented alongside hotter weathers, demand will be weak in July-August. By the end of November last year, EVA prices were at CNY13,800/tonne. If the market price falls to this state, will it help traders to build up market confidence? Will traders prepare to enter the market as profits are available? In a nutshell, EVA market was outstanding in the first half of the year. Maybe, we can be looking forward to the second half of the year.
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