FocusAsia PE prices to keep firm in Q1

17 January 2008 02:46  [Source: ICIS news]

South KoreaBy Chow Bee Lin

SINGAPORE (ICIS news)--Asian film grade polyethylene (PE) prices are expected to remain firm for the rest of the first quarter on the back of tight supply, regional traders and producers said on Thursday.

"The supply of imported film grade high density PE (HDPE) and linear low density PE (LLDPE) is low in the market because many Chinese buyers did not import much material in the past months due to soaring prices," a local trader in Nantong said in Mandarin.

Prices of film grade LLDPE, HDPE and LDPE had risen to $1,550-1,570/tonne, $1,580-1,600/tonne and $1,650-1,660/tonne on a CFR (cost and freight) China basis in the week ended 11 January. These were on average 2.8-4.7% higher from the previous week, setting new 10-year record high levels.

LDPE supply in Asia had been tight for most of last year as suppliers diverted material to markets such as the Middle East and West Africa, where netbacks were higher.

The tight LDPE supply was further aggravated this year after Petlin Malaysia shut its plant in end-December due to a mechanical problem.

Regional LLDPE supply was also reduced when two key global producers cut their January export allocations to China and southeast Asia, regional traders said.

LLDPE prices were further supported by increased import enquiries from Japan, after Mitsubishi Chemical's cracker outage affected domestic production of PE, particularly LLDPE, the regional traders said.

The eastern China region was beginning to experience a shortage of locally produced LLDPE as supplies could not be moved from the north due to congestions in the local transportation system, a trader in Zhejiang province said.

"Goods and passenger transportation had increased significantly in the run-up to the Chinese New Year holidays in early February," he said in Mandarin.

Tight supply and surging prices of imported PE have been driving end-users in China to turn to locally produced material, a second Zhejiang trader said.

"Film grade HDPE produced by Jihua and Shanghai Petrochemical are increasingly used as a substitute for imported material," he said in Mandarin.

Major film grade PE suppliers who export to China and southeast Asia markets include Saudi Basic Industries Corp (SABIC), Qatar Petrochemical Co (Qapco) and Equate in the Middle East, and Formosa Plastics, ExxonMobil, Titan Chemicals, Petlin and Honam Petrochemical in Asia.

By: Chow Bee Lin
+65 6780 4359

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