PE/PP rally may soften from Chinese buyers' retreat

25 November 2002 00:00  [Source: ACN]

A slight rally in PE and PP prices could be under threat from another retreat by Chinese buyers, increased Asian supply and very competitive shipments by US producers, industry sources said last week.

HdPE film-grade prices were said by traders to have last week increased to US$550-560/tonne from US$540-550/tonne cfr Asia the previous week.

LldPE prices were at US$520-530/tonne cif China/cfr SEA, a US$10/tonne increase.

And raffia-grade PP prices had edged up to US$610-620/tonne from US$610/tonne cfr China.

The recovery was attributed mainly to Chinese buyers re-entering the market to secure supplies arriving at end-December and in early January 2003, after the next round of World Trade Organization tariff cuts (ACN 11-17 Nov, p21).

The ExxonMobil shutdowns of its Singapore 480 000 tonne/year hdPE/lldPE plant and its 275 000 tonne/year PP facility - the result of the outage at its cracker - were also said to be behind the firming in prices.

ExxonMobil said that it would continue to supply its regular customers. However, spot supplies of biaxially oriented film and copolymer PP in particular were said to have been cut.

Basell Australia's 170 000 tonne/year PPplant in Clyde, Sydney, New South Wales, had been shut for two weeks in the first half of November because of equipment failure. The plant is due back onstream this week.

Prices were also affected by Daelim Industrial being forced to shut down its 390 000 tonne/year of hdPE capacity at Yeochon, South Korea, because of a strike.

However, buyers, who entered the market because they believed that prices were at a low point, are expected to retreat again in readiness for the Chinese New Year.

Also, the ExxonMobil plants were expected back onstream this week.

In addition, US producers might be anxious to take advantage of firmer Asian prices and/or to clear inventory ahead of Q1 2003 price negotiations, said an industry observer.

However, time was not on the side of the US producers last week because of the looming Thanksgiving holidays.

Plus for some grades of PE, there was no arbitrage. For example, hdPE film grade was at a minimum of US$530/tonne fob US Gulf Coast.

The freight rate for polymers from the US is US$40/tonne.

However, whereas there wasn't much PP available last week, PE inventories were high. This could lead to an offloading of hdPE grades in particular, the observer said.

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