A decelerating Chinese economy and cheaper crude oil are bringing down materials prices in Asia, with steel and petrochemical products showing particularly sharp declines since late July.
Hot-rolled coil, a type of steel sheet, exported from China had hovered around midway between $300 and $400 from spring to midyear before starting on a modest decline that picked up speed in the summer. It has slid 13% since early July to about $290 a ton.
The spot price of ethylene, a feedstock for a wide range of petrochemical products, has tumbled 30% since July to roughly $840 a ton, while benzene has sunk 25%. Buyers seem to be holding off on procurement, expecting sluggish demand.
Slowing Chinese demand for steel and petrochemical products has created a growing glut. And with production facilities expanding in Asia and the Middle East, expectations that supply from those regions will continue to increase have pushed prices down.
"Until the first half of July, we had thought [price] momentum would continue, but concerns have been mounting since August," said Toshio Asano, president of chemical company Asahi Kasei and chairman of the Japan Petrochemical Industry Association.
Japanese imports of high-density polyethylene, used in plastic bags, rose 36% by volume in July. Imports of polystyrene, used in food packaging, climbed 29%. Prices in Japan could be dragged down by imported goods, a polystyrene company comments.
The decline in prices throughout the rest of Asia has hit Japan as well, with some steelmakers planning to reduce prices on all of their goods next month. Tokyo Steel Manufacturing will cut its price for hot-rolled coil by 10,000 yen ($82.37) to 53,000 yen a ton in October.
"Dumping of cheap imported products has accelerated the drop in domestic prices," said Kiyoshi Imamura, managing director.
Source: Nikkei
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